ECON 538-CENGAGE (CH14).docx - 1 Individual Problems 14-1...

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1. Individual Problems 14-1 Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its dolls: low-value consumers and high-value consumers. Each of the low- value consumers tends to purchase one doll and one accessory, with a total willingness to pay of \$68. Each of the high-value consumers buys one doll and two accessories and is willing to pay \$130 in total. Mattel is currently considering two pricing strategies: Strategy 1: Sell each doll for \$34 and each accessory for \$34 Strategy 2: Sell each doll for \$6 and each accessory for \$62 In the following table, indicate the revenue for a low-value and a high-value customer under strategy 1 and strategy 2. Then, assuming each strategy is applied to one low-value and one high-value customer, indicate the total revenue for each strategy. Revenue from Low- Value Customers Revenue from High- Value Customers Total Revenue from Strategy \$68 Value, 1 Accessory \$130 Value, 2 Accessories (\$) (\$) (\$) Strategy 1 \$34 doll + \$34 accessory \$68 \$102 \$170 Strategy 2 \$6 doll + \$62 accessory \$68 \$130 \$198 .
2. Individual Problems 14-2 A local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session. Session Willingness to Pay 1st \$84 2nd \$72 3rd \$60 4th \$48 5th \$36
Session Willingness to Pay 6th \$24