A company sells two products, Product A and Product B. Assume that the variable costs for each product are $7. In a particular market, men and women value the two products as follows:

A company sells two products, Product A and Product B. Assume that the variable costs for each product are $7. In a particular market, men and women value the two products as follows:

Value to the Customer
Product A Product B
Men (50 % of market) $ 12 $ 15
Women (50 % of market) $ 14 $ 11

 

  1. If management is considering offering a bundle containing both products, what is the maximum price that could be charged for this bundle? Justify your answer.
  2. If the company’s goal is to maximize profits, should these products be offered only bundled together, offered only separately, or offered both bundled together and separately? Justify your answer.

 

In: Economics

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