You are selling a software product called Link which is available in high and low quality versions called Link Professional and Link Home respectively. You have 2 units of Link Professional and 2 units of Link Home.

There are 2 potential customers, each of whom is interested in buying 1 unit of Link (either Link Professional or Home but not both). Suppose that your objective is to maximize the total revenue from selling the software. Each buyer seeks to maximize her consumer surplus and may buy Link Professional or Link Home or neither depending on the prices that you post. Please show all intermediate steps and clearly explain your reasoning.

Scenario: The willingness to pay (WTP) of the 2 potential buyers is:

Link Professional Link Home WTP of Buyer A 650 400 WTP of Buyer B 450 350

i. Suppose you do not know the identity of either buyer and you must sell by posting one price for Link Professional and another price for Link Home. What is the optimal price and resulting revenue under the following scenario? What (if anything) would each customer buy?

ii. Suppose you could identify each buyer and make targeted offers, i.e., you could sell the same product at a different price to each customer. Which product would you offer to each customer and what is the optimal price? How much revenue would you earn? What (if anything) would each customer buy?