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Cable TV Combined Bundle Package Benefits

A cable company offers two basic packages: sports and kids, and a combined package. there are three different types of users: parents, sports fans, and generalists. The following table show the maximum price that each type of consumer is willing to pay for each package.

Sports Package Kids Package
Parents 10 50
Sports Fans 50 10
Generalists 40 40

a. If the cable company offers any one package for $50 or the combined bundled package for $70, who will buy each package?

b. Explain why the company will make a higher profit with this method than if the bundled package option were not offered.

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Solution Preview

a) A group will buy a package if the price they are willing to pay is equal to or above the package's price. Parents will buy the kids package but not the combined package because the price of the combined package is ...

Solution Summary

Given the amounts that three different groups of consumers are willing to pay for two different cable TV bundles, this solution shows how to predict which groups will buy which packages at a particular price, and explains why the cable company makes a higher profit by bundling its services in this way.