Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 18

You are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your two products differently, but you are unable to identify these consumers individually at the time of the sale. In particular, you know there are three types of consumers (1,000 of each type) with the following valuations for the two products:

a. What are your firm's profits if you charge $40 for product X and $60 for product Y?
b. What are your profits if you charge $90 for product X and $160 for product Y?
c. What are your profits if you charge $150 for a bundle containing one unit of product X and one unit of product Y?
d. What are your firm's profits if you charge $210 for a bundle containing one unit of X and one unit of Y, but also sell the products individually at a price of $90 for product X and $160 for product Y?