Scenario 17-5
Assume that a local bank sells two services, checking accounts and ATM card services. The bank's only two customers are Mr. Donethat and Ms. Beenthere. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost.
-Refer to Scenario 17-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card?

Question

Quizplus · Accepted Answer

The profit-maximizing price for unlimited use of an ATM card for each customer is the maximum amount that they are willing to pay, which is $2 for Mr. Donethat and $9 for Ms. Beenthere. Therefore, the bank should charge $9 for unlimited use of an ATM card to each customer, since that is the highest price they are willing to pay.

Scenario 17-5 Assume That a Local Bank Sells Two Services, Checking Accounts