You are the manager of a firm. The following table represents the maximum price
ID: 1200822 • Letter: Y
Question
You are the manager of a firm. The following table represents the maximum price that two different types of consumers are willing to pay for the products.
a. If the firm does not bundle the products, what single price should the firm charge for the Galaxy S7 to maximize profits? What are the profits from selling the Galaxy S7? What single price should the firm charge for the Gear VR to maximize profit? What are the profits from selling the Gear VR? What are the total profits for the firm under this pricing strategy?
b. If the firm bundles the products, what single price should the firm charge for the bundle to maximize profit? What are the profits from selling bundle?
c. If the firm implements a first-degree price discrimination scheme, what prices should it charge to maximize profits?, what are the profits for the firm?
(15 pts) You are the manager of a firm that sells the Samsung Galaxy S7 and Samsung Gear VR virtual reality headset. The following table represents the maximum price that two different types of consumers are willing to pay for the products. Galaxy S7 Gear VR Customer Reservation Price Reservation Price Type 1 Type 2 Marginal Cost Average Cost 800 700 500 80 100 50 There are 1 million type 1 customers and 1 million type 2 customersExplanation / Answer
a. If the firm does not bundle the products, the firm should charge $700 for the Galaxy S7 to maximize profits.
The profits from selling the Galaxy S7 = $400000000
The firm should charge $80 for the Gear VR to maximize profit.
The profits from selling the Gear VR = $60000000
Total profit = $460000000
b. Bundled price = $(700 + 100) = $800
Profit = $500000000
c. Price for type 1 customers (Galaxy S7) = 800
Price for type 2 customers (Galaxy S7) = 700
Price for type 1 customers (Gear VR) = 80
Price for type 2 customers (Gear VR) = 100
Total profit = 580000000
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