McDonald is famous for the Extra Value Meal, a form of mixed bundling with a lea
ID: 1227123 • Letter: M
Question
McDonald is famous for the Extra Value Meal, a form of mixed bundling with a leader combined with large French Fries and medium soft drink.
The following table gives you the Bundled Price and the Separate Price.
2.69 + 1.09 + 1.39 = 5.17
a. Do each of bundles create the same value for the customer? Show evidence.
b. Explore general economic concepts underlying the decision to create bundle prices
c. Relate the general economic concepts in #2 above to McDonald’s pricing of the extra value plans.
SEPERATE PRICE NON BUNDLED PRICE BUNDLED PRICE Large French Fries 1.39 Medium Soft Drink 1.09 McGrill Chicken Sandwich 2.692.69 + 1.09 + 1.39 = 5.17
4.29 McChicken Sandwich 1.00 3.48 3.39 Double Cheeseburge 1.00 3.48 3.39 Quarter Pounder 2.19 4.67 3.79Explanation / Answer
A.
No, bundled offers are coming at different prices. Thus, they are offering different value to the customer. For example, a bundle of McGrill Chicken Sandwich is priced at 4.29 and a bundle of Quarter Pounder is priced at 3.79. Thus, both the bundles will give different levels of satisfaction to the consumers. Besides,
Extra value offered by bundle of McGrill Chicken Sandwich = 5.17 - 4.29 = .88
Extra value offered by a bundle of Quarter Pounder = 4.67 - 3.79 = .88
Extra value offered by a bundle of Double Cheeseburger = 3.48 - 3.39 = .09
Thus, extra value also does not remain the same across the different bundles.
B.
Economy of scale and economy of scope is used behind the bundling of the products. Economy of scope helps in reduction of cost when multiple products are produced. It helps in bundling of products at relatively lower price. It helps in increase in sales. Also, economy of scale causes company to produce in large numbers at reduced cost. it also helps in bundling at reduced cost. Thus, company can offer the bundled product at reduced cost and it creates extra value to the consumers.
C.
Extra value generated by bundled product is observed as follows:
Extra value offered by bundle of McGrill Chicken Sandwich = 5.17 - 4.29 = .88
Extra value offered by a bundle of Quarter Pounder = 4.67 - 3.79 = .88
Extra value offered by a bundle of Double Cheeseburger = 3.48 - 3.39 = .09
Above extra value is only possible because the company has adopted the concepts of economy of scope and economy of scale.