HW4_Questions&AnswerKeys

HW4_Questions&AnswerKeys - Versioning Test Problem...

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4 th Individual Assignment: Versioning Test Problem Given the following information, does ACME maximize its profit by offering just a slow speed carrot peeler, just a high speed, or both? ACME has a monopoly in the carrot peeler industry. What price(s) would be charged? What profit would be made? Segment Number of consumers Benefit derived from Product Slow speed High Speed A 30 $70 $80 B 10 $50 $90 Marginal costs of production are zero for both the high and slow speed carrot peeler. Consumers in each segment all behave exactly same. They purchase the high speed peeler, the slow speed peeler or neither. Answer the above questions once more in the situation where marginal cost is still zero for the slow speed carrot peeler but $30 for the high speed carrot peeler. [Note Profit = (Price – Marginal cost) × Number of units sold ]
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Unformatted text preview: Versioning Test Problem: Answer Key Variation of the Case 1 Perceived Benefit ($) Version 50 80 70 L H Segment A Segment B 90 • Offering L only ± P L =70 ± Sell L to ONLY A ± Profit=70×(30+0)=2,100 • Offering H only ± P H =80 ± Sell H to both A and B ± Profit=80×(30+10)=3,200 • Offering both L & H (Versioning) ± Rule of thumb: Sell each version to the segment with higher valuation That is, sell L to segment A and sell H to segment B ± Set P L = $70 to sell L to A and set P H = $90 to sell H to B ± Profit=70×30+90×10=3,000 (30 consumers) (10 consumers) Offering H only @$80 is the profit maximizing choice When MC L =0 and MC H =$30? Offering both L & H @$70 & $90 respectively is the profit maximizing choice (Profit=$2,700)...
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This document was uploaded on 03/03/2012.

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HW4_Questions&AnswerKeys - Versioning Test Problem...

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