Suppose healthyway is deciding on the flavor

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Reference no: EM132299309

Suppose HealthyWay is deciding on the flavor of its new line of microwaveable family dinners. Its market research reveals that its consumer base of 100 consumers have the following tastes: 1/3 of them prefer “minimal”, 1/3 of them prefer “extremely spicy” and the remaining 1/3 of them prefer “medium spicy”. Consumers have a valuation of $10 when the flavor of the dinner is precisely located at their preferred flavor level. Otherwise, they suffer a cost of $5 for each unit difference between the dinner’s flavor’s level of spiciness and their preferred level.

Imagine that the 1/3 of consumers who prefer “basic” are located at point 0, the 1/3 of consumers who prefer “extremely spicy” are located at point 1 and the 1/3 of consumers who prefer “medium spicy are located at point 0.5 on a line from 0 to 1 that represents the flavor spectrum.

(a) Suppose HealthyWay has only one dinner it sells and it chooses a flavor that is “medium spicy”. What price should HealthyWay charge for the dinner if it wishes to sell to all consumers in the market?

(b) Now, suppose HealthyWay can develop two dinners and sell a product line of its dinners. What flavors (where in the flavor spectrum) would you advise HealthyWay to choose for the two dinners and what will be the price for the two dinners?

Reference no: EM132299309

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