Author Question: Why is bundling of unrelated products, one of which is available in the competitive market, a losing ... (Read 77 times)

burchfield96 · **on:** Jun 30, 2018

Why is bundling of unrelated products, one of which is available in the competitive market, a losing strategy?

Question 2

Grocery store coupons, mail-in rebates, senior discounts, and in-state versus out-of-state tuition fees are all examples of:
a. government intervention.
b. price neutrality.
c. arbitrage pricing.
d. price discrimination.
e. illegal business practice.

yifu223 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Bundling of unrelated products is likely to reduce a monopolist's profit. If a monopolist bundles two goods, one of which is available in the free market, the bundled product will not appeal to many people in the market. The monopolist loses those customers who have such low valuations of the competitive product that they are unwilling to buy the bundled version, while they would have purchased the monopolized product had it been offered unbundled.Offering only the bundle deprives the monopolist of potential profits.

Answer to Question 2

d