Suppose there are two types of cable TV viewers. The first type places a high value on sports channels (e.g., ESPN, Fox Sports, and The Golf Channel) and a low value on all other channels. The second type places a high value on music channels (VH1, MTV3, and CMT) and a low value on all other channels. In this case, we would expect cable operators to:
A) sell sports and music channels in one bundle to both types of viewers.
B) sell only sports channels to the first type of viewers and sell only music channels to the second type of viewers.
C) use "à la carte" pricing.
D) use fixed-cost pricing.

Question

Quizplus · Accepted Answer

Cable operators would likely bundle sports and music channels together to maximize revenue by appealing to both types of viewers, leveraging the different preferences to sell a combined package.

Suppose There Are Two Types of Cable TV Viewers