solution

Food for Life makes health foods for active, outdoor people. Their three basic

products are whey powder, a high protein strength bar, and a meal additive

that has the taste and consistency of sawdust. Research shows that consumers

fall into two types (A and B) and these are described in the table below by their

reservation prices for the products. Each consumer will demand no more than

one unit of any product at their reservation price. The consumers will value a

bundle of the products at the sum of the constituent reservation prices. Each

product costs $3 to produce. A bundle of all three products costs $9 to produce.

Food for Life does not price discriminate. There is an equal number of each consumer type (for simplicity, one of each type).

What pricing (profit-maximizing) strategy (among pricing separately,

pure bundling, and mixed bundling) would you recommend to Food for Life?

Why? Only bundles of all three products need to be considered.