Types of customers | MyTopTutor

At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).

order now
Coffee 73 63
Banana 48 98

The marginal cost of coffee is 5 and the marginal cost of a banana is 20.

The café owner is considering three pricing strategies:

1. Mixed bundling: Price bundle of coffee and a banana for 161, or just a coffee for 73.
2. Price separately: Offer coffee at 63, price a banana at 98.
3. Bundle only: Coffee and a banana for 121. Do not offer goods separately.

Assume that if the price of an item or bundle is no more than exactly equal to a student’s willingness to pay, then the student will purchase the item or bundle.

For simplicity, assume there is just one student with an early class, and one student without an early class.

Pricing strategy     yields the highest profit for the café owner.