Explore BrainMass
Share

Pricing strategies in case of Monopoly

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

You are the monopoly seller of computers and monitors. Remarkably, the costs of production for both products are zero. You sell to a market consisting of two segments (A and B). The RP's of each segment for computers and monitors are the following:
A's RP: Computer: $2,000 Monitor: $200
B's RP: Computer: $1,500 Monitor: $300

There are an equal number in each segment. A buyer can choose to buy one product and not the other.

SHOW ALL EXCEL FORMULAS

1) If you were selling computers and monitors separately, what price should you charge for each to maximize revenue?

2) If you were to bundle the computer and monitor together and sell only the bundle, what price should you set to maximize revenue?

3) Could you generate more revenue than in parts (1) and (2) through mixed bundling?

© BrainMass Inc. brainmass.com March 22, 2019, 3:13 am ad1c9bdddf
https://brainmass.com/economics/cost-benefit-analysis/pricing-strategies-case-monopoly-605862

Solution Preview

1) If you were selling computers and monitors separately, what price should you charge for each to maximize revenue?
Let the no. of consumers in each segment be 100

If the price of computer is $2000, only 100 customers from segment A will buy.
If the price of computer is $1500, 200 customers (100 from each segment) will buy.
Total Revenue (if price of computer is $2000)= 200000
Total Revenue (if price of computer is $1500)= 300000
Revenue from selling computers is maximized at a price of $1500

Similarly we ...

Solution Summary

The solution describes the steps to find the optimal price in each of given cases.

$2.19