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6. Bundling Movie 1 Movie 2 Theater 1 $17,500 $12,500 Theater 2 $15,000 $13,000 • Movie...

6. Bundling

Movie 1 Movie 2
Theater 1 $17,500 $12,500
Theater 2 $15,000 $13,000

• Movie Theater 1 has the reservation price $17,500 for movie 1 and $12,500 for movie 2.
• Movie Theater 2 has the reservation price $15,000 for movie 1 and $13,000 for movie 2.
• How much would you charge for a bundle of movie 1 and 2? Please explain your solution.

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Answer #1

So, Maximum Price can be paid by Theater 1 = $17500+$12500 = $30000

Maximum Price charged by theater 2 = $15000+$13000

= $28000

Therefore if you set a price above $28000, only theater 1 would buy and in order to maximise revenue, you have to set $28,000 so that both theater 1 and theater 2 will buy and you'll get a maximum revenue of

$28000*2 = $56,000

Therefore optimal bundle price = '$28,000'

Please do like the solution and upvote. Thanks!

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