# You manage a donut shop that s

You manage a donut shop that sells two goods – donuts andcoffee. You also face two types of customers – customer type A andcustomer type B, and you see 100 customers of each type. Theirrespective values for the 2 goods you sell are:

 Type A Type B Donut \$3 \$2 Coffee \$8 \$3

If you sell donuts and coffee separately, what prices should youcharge for each?

Donuts: \$______________

Coffee: \$______________

If you sell the 2 goods together as a bundle, what price shouldyou charge for the bundle?

Case 1: Separate Pricing

Take the case of donuts

Revenue at a price of \$3=3*100=\$300 (only 100 units will besold)

Revenue at a price of \$2=2*200=\$400 (200 units will be sold)

Revenue is higher if donut is charged a price of \$2.

So, Price of donut: \$2

Take the case of coffee

Revenue at a price of \$8=8*100=\$800 (only 100 units will besold)

Revenue at a price of \$3=3*200=\$600 (200 units will be sold)

Revenue is higher if coffee is charged a price of \$8.

So, Price of coffee: \$8

Case 2 : Bundle Pricing

Possible prices are \$11 (8+3) and \$5 (3+2)

Revenue at a price of \$5=5*200=\$1000 (200 bundles will besold)

Revenue at a price of \$11=11*100=\$1100 (only 100 bundles will besold)

Revenue is higher if bundle is charged a price of \$11.

So, Price of bundle: \$11

Summary

If you sell donuts and coffee separately, what pricesshould you charge for each?

Donuts: \$2

Coffee: \$8

If you sell the 2 goods together as a bundle, what priceshould you charge for the bundle?

Bundle: \$11

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