Suppose that a monopolist seller of spreadsheet and word processor programs face

Question

Suppose that a monopolist seller of spreadsheet and word processor programs faces four types of consumers, A-D. The willingness to pay for a spreadsheet is $0 for types A and B, and $100 for types C and D. The willingness to pay for a word processor is $0 for types A and C, and $100 for ty-pes B and D. The marginal cost of producing either good is zero. There are 1,000 consumers of each type. Compare the profits from selling the two goods separately and selling them as a bundle. Which is more profitable?

Explanation / Answer

Profit under individual selling = (100*1000) + (100*1000) + (100*1000) + (100*1000) = 400000

Profit under bundling = (100*1000) + (100*1000) + (200*1000) = 400000

Profits are same.

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