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Assume you are a consultant to a manufacturer of automobiles who is toying with the idea of offering a couple of luxury options in a package. Research conducted by the automaker suggests there are three equally attractive segments in the market but they differ on the value they place on the options. The table below summarizes the value of each of the options to each of the segments.
Segments
Wet Weather Sun Belt Romeos Midwest Snowmen
Anti-lock brakes $750 $600 $800
Power sunroof $550 $900 $600 Assuming that maximizing revenue is the objective, what price would you recommend to your client for the package? Why?
If your client believes that it is better to offer the options separately as well, what prices would you recommend for each of the options when purchased separately? Why? What is the value of bundling over selling the items separately? [What is the incremental revenue because of bundling?]
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