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Question-3 (15 Points): A store sells pencils and pens and has two types of customers

Economics

Question-3 (15 Points): A store sells pencils and pens and has two types of customers. Their willingness-to-pay for a kilogram of each good is given in the table below. Type I Type II Pencil $X $12 Pen $6 $10 where X > 0. There is a mass N of consumers. Half of these consumers are Type I, and the other half are Type II. The store is not able to price discriminate. Costs are normalized to zero. a) [7.5 Points] Compute the store's profit under separate pricing (i.e., under unbundling) as a function of X. b) [7.5 Points] Compute the store's profit under pure bundling as a function of X. Pure bundling means that the store is only selling the two products as a package.

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