A 30-minute massage at Massage Envy costs on average about $50. A massage at The Woodhouse Day Spa in contrasts costs about $125 for a 30-minute massage. Unlike physical products whose price is largely dependent on the quality of materials used to produce it, the price of services is often harder to determine What can contribute to the price disparity in the example above? Include in your discussion the characteristics of services discussed in Chapter 13 and presented in the video clips in this module.

A 30-minute massage at Massage Envy costs on average about $50. A massage at The Woodhouse Day Spa in contrasts costs about $125 for a 30-minute massage. Unlike physical products whose price is largely dependent on the quality of materials used to produce it, the price of services is often harder to determine What can contribute to the price disparity in the example above? Include in your discussion the characteristics of services discussed in Chapter 13 and presented in the video clips in this module.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter8: Evolutionary Solver: An Alternative Optimization Procedure

Section8.4: Nonlinear Pricing Models

Problem 4P

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Your local grocery store stocks rolls of bathroom tissue in single packages and inmore economical 12-packs. You are trying to decide which to buy. The singlepackage costs 45 cents and the 12-pack costs $5. You consume bathroom tissue ata fairly steady rate of one roll every three months. Your opportunity cost of moneyis computed assuming an interest rate of 25 percent and a fixed cost of $1 for theadditional time it takes you to buy bathroom tissue when you go shopping. (We areassuming that you shop often enough so that you don’t require a special trip whenyou run out.)a. How many single rolls should you be buying in order to minimize the annualholding and setup costs of purchasing bathroom tissue?
Your local grocery store stocks rolls of bathroom tissue in single packages and inmore economical 12-packs. You are trying to decide which to buy. The singlepackage costs 45 cents and the 12-pack costs $5. You consume bathroom tissue ata fairly steady rate of one roll every three months. Your opportunity cost of moneyis computed assuming an interest rate of 25 percent and a fixed cost of $1 for theadditional time it takes you to buy bathroom tissue when you go shopping. (We areassuming that you shop often enough so that you don’t require a special trip whenyou run out.)b. Determine if it is more economical to purchase the bathroom tissue in 12-packs.
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