Economics Bundling Help Please review the word docs and follow the steps for the excel. Please answer the questions in the word doc on the second page.

Please review the word docs and follow the steps for the excel. 

Please answer the questions in the word doc on the second page.

Thank you.

Step 1

Prepare the date – Replace all bundle prices (highlighted in YELLOW) on the Analysis tab of the working sheet — “Bundling – PSet1 – Part 2” — by following these steps:

Go to WTP tab and look for the row with total willingness to pay for each bundle (row 103, Bundle WTP).

Add a new sheet/tab and use Excel’s transpose function to copy/paste these values in a vertical array. Copy this array and paste ‘values only’ in a separate column. Sort this column from smallest to largest values. Copy/paste the sorted values in Analysis tab to replace the bundle prices.

Observe the new Bundle Demand and Bundle Profit curves.

Step 2

For students in EU: You may need to change an Excel setting so all periods ‘.’ do not get changed to commas ‘,’. This may be the case for both Windows (see the adjacent cell) and Macintosh users. See instructions below to avoid this problem. (https://resrequest.helpspot.com/index.php?pg=kb.page&id=277). Instructions about how to change column labels from numbers to letters:

Select the File tab in the toolbar at the top of the screen

Click on Options in the menu

This will pop open the Excel Options window, click on the Formulas option on the left

Uncheck the option called “R1C1 reference style”

Click on the OK button to save changes

Step 3

In the Analysis tab, calculate the empty cells highlighted in YELLOW to answer the Part 2 questions below.

Hint: Do not forget that you have other tabs to utilize for this assignment. Review the prompts and formulas available in the spreadsheet as you work through each question.

For numeric values, you should enter up to 2 decimal places.

Question 1 What is the optimal price of a bundle? (Format as $0.00) _______

Question 2 What are the maximum profits of the firm? (Format as $0.00) _______

Question 3 How much consumer surplus do consumers keep? (Format as $0.00) _______

Question 4 At this price, what proportion of songs with positive value are not sold? (Format as 0.00%) _______

Question 5 Do any consumers’ bundles include songs that they did NOT rate?

Yes

No

Not enough information

Question 6 How much social value is not created? (Format as $0.00) Blank 1

Question 7 Total sales have increased, but does this mean total surplus kept by consumers has also increased?

No. An even higher proportion of consumer surplus has been transferred to the seller.

No. Consumers keep none of their surplus.

Yes. Because sales increase, consumer surplus also increases.

Yes. Because the seller has captured less surplus.

Question 8 What other change should be made to the original pricing strategy if the MC of each good is MC=$0.12 rather than MC=$0?

Return to independent good pricing

Drop all items with WTP < $0.12 from each person’s individual bundle

Raise bundle price by $0.12

No change, keep as-is

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