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

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