Bundling and Economic Value in Use

Unbundling

Click the card to flip 👆

1 / 11

Terms in this set (11)

Separating out the individual goods, services, or ideas that make up a product and pricing each one individually.

To determine maximum revenue when only individual concert tickets are sold what do you need to calculate?

Price | Volume | Revenue.
Equation for each segment will be
Price x Volume = Revenue
Use this formula to find most lucrative option

What are the benefits of bundling?

1. If there is a negative correlation in Willingness to Pay, bundling will always work.
2. Bundling reduces the range of variation of customer's willingness to pay.

What is Pure Bundling?

• firm offers both good 1 and good 2 as a bundle at price P(B) => then determines the pure bundling profit π(B)
• firm will set the price of bundle lower than the customers' reservation price

What are the steps for pure bundling?

1. Figure out the willingness to pay for the bundled ticket price. (In the concert example, segments 3 & 4 are willing to pay $100 for the bundle. Segments 1 & 2 are willing to pay $120 for the bundle.)

2. multiply the bundled price by the number of people willing to pay at that price. (In the concert example, all 4 segments will pay $100, so the revenue is $100 X 2000. Only 2 segments are willing to pay $120, so the revenue is $120 X 1000. Consequently $100 is the better price with revenue of $200,000.)

mixed bundling

selling two or more goods both as a package and individually

What are the steps for mixed bundling

1. Set individual price at maximum ($90 in the example because segments 3 & 4 are willing to pay $90 for a single concert)

2. Set combination price at maximum ($120 in the example because segments 1 & 2 are willing to pay up to $120 for the bundle).

3. multiply the price per concert ($90) times the volume (500 in a single segment) to get single ticket revenue of $45,000 per concert.

4. There are two concerts where the segments are willing to pay $90 per ticket, so multiply $45,000 x 2. Revenue for two concerts is $90,000

5. There are two concerts for which the max WTP is $120 for the bundle, so multiply the bundle price by the number of people willing to pay for the bundle ($120x1000). Bundle revenue equals $120,000.

6. Add bundled revenue to single ticket revenue: $90,000 + $120,000. Total revenue for mixed bundle is $210,000.

Currently the preferred choice is Clear Blu which reduces other chemical costs by 15% annually. Annual costs are $300 without Clear Blu. What is the formula for savings with Clear Blu?

$300 (.15) = $45

If annual savings with Clear Blu is $45, what is the cost to use Clear Blu if Clear Blu retails at $75, and costs without product are $300?

$300-$45+ $75 = $330

Our product reduces other chemical costs by 25% annually. Annual costs are $300 without our product. What is the formula for savings with our product?

$300(.25) = $75

Verified questions

economics

Suppose the French suddenly develop a strong taste for California wines. Answer the following question in words and with a diagram. a. What happens to the demand for dollars in the market for foreign-currency exchange? b. What happens to the value of dollars in the market for foreign-currency exchange? c. What happens to the quantity of net exports?

Verified answer

question

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, $r_f$ . The characteristics of two of the stocks are as follows:

Stock	Expected Return	Standard Deviation
A	8%	40%
B	13	60
Correlation=-1

Could the equilibrium $r_f$ be greater than $10\%$ ? (Hint: Can a particular stock portfolio be substituted for the risk-free asset?)

Verified answer

finance

Explain: Compounding is the most powerful force in the universe.

Verified answer

accounting

Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:

a. On December 31, the company determined that $3,400,000 of goodwill was impaired. b. Governmental and legal costs of$4,800,000 were incurred on September 30 in obtaining a patent with an estimated economic life of eight years. Amortization is to be for one-fourth year. c. Timber rights on a tract of land were purchased for $2,975,000 on February 4. The stand of timber is estimated at 12,500,000 board feet. During the current year, 4,150,000 board feet of timber were cut and sold.

Instructions

Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
Journalize the adjusting entries to record the amortization, depletion, or impairment for each item.

Verified answer