Question

Question 6

A monopoly sells two products, of which any given consumer wants to buy only one (and places no value on the other good). If the monopoly can prevent resale, can it increase its profit by bundling the goods, forcing consumers to buy both goods?

Answer 1

The market price for the bundle will be equal to the some of the valuation of the two goods by consumers. If consumers are not placing any value on the other good then it means that, the price of the wonderla will be equal to the price of the single good demanded by consumer. In that case there will be no difference in terms of the profit earned, between selling the two goods separately and selling them as a bundle.

Therefore bundling will not increase the profit.