You are the only European firm selling vacation trips to the North Pole. You know only three customers are in the market. You offer two services, round trip airfare and a stay at the Polar Bear Hotel. It costs you 300 euros to host a traveler at the Polar Bear and 300 euros for the airfare. If you do not bundle the services, a customer might buy your airfare but not stay at the hotel. A customer could also travel to the North Pole in some other way (by private plane), but still stay at the Polar Bear. The customers have the following reservation prices for these services:
a) If you do not bundle the hotel and airfare, what are the optimal prices PA and PH, and what profits do you earn?
b) If you only sell the hotel and airfare in a bundle, what is the optimal price of the bundle PB, and what profits do you earn?
c) If you follow a strategy of mixed bundling, what are the optimal prices of the separate hotel, the separate airfare, and the bundle (PA, PH, and PB, respectively) and what profits do you earn?
