When we compare erther pure or mixed bundling with simple monopoly pricing, it 1s clear that mixed bundling always increases the monopolist's sales. What is less clear is whether bundling will increase the monopolist's profits. (a) Explain what the profit impact of commodity bundling will depend upon. Assume that a monopolist knows that it has four consumers, A, B, C, and D, each interested in buying the two goods, 1 and 2. The marginal cost of good 1 is cl = $100 and of good 2 is c2 = $150. Each consumer has reservation prices for these two goods, as given in the table below and buys exactly one unit of erther good in any period so long as its price is less than the reservation price for that good. Also assume that each consumer will consider buying the goods as a bundle provided that the bundle price is less than the sum of the reservation prices. Consumer Reservation Prices Consumer Reservation price for Reservation price for Sum of Reservation Prices good 1 good 2 a = = 50 Pr = Po DSO (b) If the monopolist decides to sell the goods unbundled and adopts simple monopoly pricing, identify the profit-maximizing monopoly prices for the two goods and calculate the profit levels for each good sold separately. (c) Now consider the pure bundling strategy. Determine the bundle price and calculate the total profit. (d) Can a mixed bundling strategy do better? Determine the pricing formula under which profits under mixed bundling exceed that of Pure bundling and calculate by how much