Scenario 17-5
Assume that a local restaurant sells two items, salads and steaks. The restaurant's only two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr. Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the restaurant can provide each of these items at zero marginal cost.
-Refer to Scenario 17-5. How much additional profit can the restaurant earn by switching to the use of a tying strategy to price salads and steaks rather than pricing these goods separately?

Question

Quizplus · Accepted Answer

By using a tying strategy, the restaurant can bundle a steak and a salad together and charge $27 for the bundle, which both customers are willing to pay. This results in a total revenue of $54 from both customers. If priced separately, the maximum revenue would be $48 ($20 + $7 from Mr. Carnivore and $12 + $8 from Ms. Leafygreens). The additional profit from the tying strategy is $54 - $48 = $6.

Scenario 17-5 Assume That a Local Restaurant Sells Two Items, Salads and Salads