Maximize revenue for the manufacturer

Assignment Help Business Economics
Reference no: EM133082038

Question

A manufacturer of microwaves has discovered that male shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Female shoppers generally value microwaves more than men do and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $59 and one with auto-defrost at $76, while women value a simple microwave at $76 and one with auto-defrost at $135.

Suppose the manufacturer is considering three pricing strategies:

1.

Market a single microwave, with auto-defrost, at $76, to both men and women.

2.

Market a single microwave, with auto-defrost, at $135, to only women.

3.

Market a simple microwave to men, at $59. Market a microwave, with auto-defrost, to women at $117.

For simplicity, assume there is only 1 man and 1 woman and that if the price of a microwave is equal to an individual's willingness to pay, the individual will purchase the microwave.

Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy.

Strategy

Revenue from Men

Revenue from Women

Total Revenue from Strategy

1. Auto-Defrost Microwave only at $76

 

 

 

2. Auto-Defrost Microwave only at $135

 

 

 

3. Simple Microwave at $59, Auto-Defrost Microwave at $117

 

 

 

Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of women. For simplicity, you can assume this means that there are two women, and no men.

Under these conditions, pricing strategy ( 1,2,or 3)   would maximize revenue for the manufacturer.

Question

The pricing model for iTunes has been to price songs individually. In contrast, Spotify opted to offer unlimited song playing for a monthly fee.

True or False: Spotify's pricing model will likely yield more profit if the value of the "bundle" of unlimited songs is more homogeneous across consumers than the values of the individual songs.

Question

At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).

 

Students with Early Classes

Students without Early Classes

Coffee

73

63

Banana

53

103

The marginal cost of coffee is 5 and the marginal cost of a banana is 20.

The café owner is considering three pricing strategies:

1.

Mixed bundling: Price bundle of coffee and a banana for 166, or just a coffee for 73.

2.

Price separately: Offer coffee at 63, price a banana at 103.

3.

Bundle only: Coffee and a banana for 126. Do not offer goods separately.

Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle.

For simplicity, assume there is just one student with an early class, and one student without an early class.

Price Strategy

Revenue from Pricing Strategy

Cost from Pricing Strategy

Profit from Pricing Strategy

1. Mixed Bundling

 

 

 

2. Price Separately

 

 

 

3. Bundle Only

 

 

 

Pricing strategy (1,2,or 3)  yields the highest profit for the café owner.

Reference no: EM133082038

Questions Cloud

Pricing analyst for quantcrunch corporation : You are a pricing analyst for QuantCrunch Corporation, a company that sells a statistical software package. To date, you only have one client. A recent internal
What is the nominal value of the first payment : On 5 October, someone in California bought the winning ticket for Powerball, whose prize was described as $699.8 million. The lucky winner gets 30 annual paymen
Growing baby boom population on the system : Explain the impact of the growing baby boom population on the system and how their complex needs may affect the cost, access, and quality of care;
Achieving a target interbank rate : What according to you can be the issues a central bank can face in achieving a target interbank rate in the absence of standing lending and deposit facilities?
Maximize revenue for the manufacturer : A manufacturer of microwaves has discovered that female shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature
How a constitutional liberty has personally benefited : Explain how a constitutional liberty has personally benefited or impacted you as a student or a citizen in the United States
Competitive advantage in business environments : Per the textbook, technology is a key driver of change and an important source of competitive advantage in business environments.
Level of expenditure in the economy : Suppose a country's inflation level is higher than desired, and unemployment levels are lower than expected - the central bank decides that the economy is 'over
Importance of using appropriate measuring tool : 1. Discuss the importance of using appropriate measuring tool/utensils when measuring dry and liquid ingredients.

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd