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Consider a firm with market power that sells suits. The firm has two types of customers, A and B. There are an equal number of customers of each type. Type-A customers are willing to pay up to $100 for a coat and up to $50 for pants. Type-B customers are willing to pay up to $75 for a coat and up to $65 for pants. Suppose for simplicity that the marginal cost of production is zero. If the firm practices bundling, then what is the optimal price for a suit (which is a bundle of the two products).

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9694042

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