Reference no: EM13125109
A software company has developed a statistical package that can perform advanced and high level procedures as well as some simple and basic analyses in a user friendly way. Currently the company produces only a full version of the product which it sells to a market of three groups of potential customers. The three groups, which are equal in size, are:
- Professional statisticians, who are willing to pay 1,000$ for the full version.
- Students , who are willing to pay 550$ for the full version
- Amateurs, who enjoy playing with statistical analyses and are willing to pay 200$ for the full version.
(a) Calculate the profit maximizing price of the full package? What is the firm's profit in this case? (Assume the firm has no costs.)
A proposal has been made to develop a less advanced version. The willingness to pay for this intermediate version is given by:
- Professional statisticians are willing to pay 600$.
- Students are willing to pay 500$.
- Armatures are willing to pay 200$.
(b) Calculate the profit maximizing prices if the company decides to develop and sell both versions of the product (the full version and the intermediate version). What will be the firm's profit in this case?
An additional proposal has come up to develop three versions of the software. In addition to the above two versions, the company will develop a basic package that can perform only basic statistical analysis, but it is more user friendly and in its visual quality is similar to the two more advanced versions.
- Professional statisticians are willing to pay 0$ for the basic package, which they don't really need.
- Students are willing to pay 100$ for the basic package.
- Amateurs are willing to pay 150$ for the basic package.
(c) If the company decides to develop and sell all three versions of the software, what will be its profit maximizing prices and what will be its profit in this case?
The marketing manager of the firm proposes to improve the basic package, as the costs of such an improvement are negligible. Students will be willing to pay 300$ for this version (compared with 100$ for the original basic package) and amateurs will be willing to pay 200$ (compared with 150$ for the original basic package).
(d) What will be the profit maximizing prices and the firm's profit, if the proposal of the marketing manager is accepted?
(e) Should the firm accept the marketing manager's proposal? If your answer is yes, calculate how much the firm will be willing to pay in order to perform the improvement the marketing manager has suggested.
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