Trisha’s Fashion Boutique sells earrings and pendants. Trisha has two

Trisha’s Fashion Boutique sells earrings and pendants. Trisha has two types of customers. Their willingness-to-pay for earrings and pendants are given in the table below.

If Trisha bundles the earrings and pendants together, could she increase revenue? Earrings Pendant Type I 100 65 Type II 90 75

ANSWER

If Trisha bundles the products together and sells the bundle for $165, each of her customers will be willing to buy the bundle. Without bundling, Trisha would need to sell the earrings for $90 and the pendants for $65 in order to sell each customer both items. Thus, revenue from both items is $155 for each customer. Bundling increases Trisha’s revenues by $10 per customer.