The following table contains different consumers' values for three software titles: PowerPoint, Excel, and Word. Suppose there are 100 consumers of each type. It costs Microsoft $5 to produce each piece of software. If Microsoft wants to devise a pricing strategy that is incentive compatible between consumer types and will maximize its profit, then it should:
A) charge $50 for PowerPoint, $80 for Excel, and $75 for Word.
B) charge a single price of $300 for the bundle of PowerPoint, Excel, and Word.
C) charge $125 for PowerPoint, $175 for Excel, and $150 for Word.
D) charge $325 for the bundle of PowerPoint, Excel, and Word and permit consumers to purchase each software title individually at $81.10 each.

Question

The following table contains different consumers' values for three software titles: PowerPoint, Excel, and Word. Suppose there are 100 consumers of each type. It costs Microsoft $5 to produce each piece of software. If Microsoft wants to devise a pricing strategy that is incentive compatible between consumer types and will maximize its profit, then it should: 
A) charge $50 for PowerPoint, $80 for Excel, and $75 for Word. 
B) charge a single price of $300 for the bundle of PowerPoint, Excel, and Word. 
C) charge $125 for PowerPoint, $175 for Excel, and $150 for Word. 
D) charge $325 for the bundle of PowerPoint, Excel, and Word and permit consumers to purchase each software title individually at $81.10 each.

Quizplus · Accepted Answer

The Answer of The following table contains different consumers' values for three software titles: PowerPoint, Excel, and Word. Suppose there are 100 consumers of each type. It costs Microsoft $5 to produce each piece of software. If Microsoft wants to devise a pricing strategy that is incentive compatible between consumer types and will maximize its profit, then it should: 
A) charge $50 for PowerPoint, $80 for Excel, and $75 for Word. 
B) charge a single price of $300 for the bundle of PowerPoint, Excel, and Word. 
C) charge $125 for PowerPoint, $175 for Excel, and $150 for Word. 
D) charge $325 for the bundle of PowerPoint, Excel, and Word and permit consumers to purchase each software title individually at $81.10 each.

The Following Table Contains Different Consumers' Values for Three Software