A monopolist selling several di erent products can sometimes "price discriminate" by bundling her products together. Here's an example. Suppose the U of C is planning to o er a series of two concerts. The rst program in the series consists of music by Chopin; the second, music by Stravinsky. There are four types of patrons with the following reservation prices (willingness to pay) for the concerts:
Romantic Type: $40 for Chopin, $20 for Stravinsky Modern Type $20 for Chopin $40 for Stravinsky
Chopin Lover $45 for Chopin $5 for Stravinsky
Stravinsky Lover $5 for Chopin $45 for Stravinsky
Suppose for simplicity that there is only one individual of each type and everyone can be accom-
modated at either performance. Also suppose the U of C does not know any individual's given
type.
(a) Suppose rst that separate tickets are o ered for the two concerts. What is the pro t
maximizing price per ticket?
(b) Suppose that only a single ticket for the series is o ered. What is the pro t maximizing
price for a series ticket? Have pro ts increased? What is the intuition for this result?
(c) Can you nd a more pro table alternative?