Ter of miC Inas uiscovVereu tiat male shoppers nave little value for microwaves and attribute almost no extra value to an auto- efrost feature. Female shoppers generally value microwaves more than men do and attribute greater value to the auto-defrost feature. There is little dditional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $68 and one vith auto-defrost at $82, while women value a simple microwave at $82 and one with auto-defrost at $150. Suppose the manufacturer is considering three pricing strategies: 1. Market a single microwave, with auto-defrost, at $82, to both men and women. 2. Market a single microwave, with auto-defrost, at $150, to only women. 3. Market a simple microwave to men, at $68. Market a microwave, with auto-defrost, to women at $135. For simplicity, assume there is only 1 man and 1 woman and that if the price of a microwave is equal to an individual's willingness to pay, the individual will purchase the microwave. Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy. Revenue from Revenue from Total Revenue from Strategy Men Women Strategy 1. Auto-Defrost Microwave only at $82 2. Auto-Defrost Microwave only at $150 3. Simple Microwave at $68, Auto-Defrost Microwave at $135
Ter of miC Inas uiscovVereu tiat male shoppers nave little value for microwaves and attribute almost no extra value to an auto- efrost feature. Female shoppers generally value microwaves more than men do and attribute greater value to the auto-defrost feature. There is little dditional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $68 and one vith auto-defrost at $82, while women value a simple microwave at $82 and one with auto-defrost at $150. Suppose the manufacturer is considering three pricing strategies: 1. Market a single microwave, with auto-defrost, at $82, to both men and women. 2. Market a single microwave, with auto-defrost, at $150, to only women. 3. Market a simple microwave to men, at $68. Market a microwave, with auto-defrost, to women at $135. For simplicity, assume there is only 1 man and 1 woman and that if the price of a microwave is equal to an individual's willingness to pay, the individual will purchase the microwave. Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy. Revenue from Revenue from Total Revenue from Strategy Men Women Strategy 1. Auto-Defrost Microwave only at $82 2. Auto-Defrost Microwave only at $150 3. Simple Microwave at $68, Auto-Defrost Microwave at $135
Chapter18: Asymmetric Information
Section: Chapter Questions
Problem 18.6P
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Transcribed Image Text:A manufacturer of icrowaves has discovered that male shoppers have little value for microwaves and attnbute almost no exxtra value to an auto-
defrost feature. Female shoppers generally value microwaves more than men do and attribute greater value to the auto-defrost feature. There is little
additional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the
manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $68 and one
with auto-defrost at $82, while women value a simple microwave at $82 and one with auto-defrost at $150.
Suppose the manufacturer is considering three pricing strategies:
1. Market a single microwave, with auto-defrost, at $82, to both men and women.
2. Market a single microwave, with auto-defrost, at $150, to only women.
3. Market a simple microwave to men, at $68. Market a microwave, with auto-defrost, to women at $135.
For simplicity, assume there is only 1 man and 1 woman and that if the price of a microwave is equal to an individual's willingness to pay, the
individual will purchase the microwave,
Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy.
Revenue from
Revenue from
Total Revenue from
Strategy
Men
Women
Strategy
1. Auto-Defrost Microwave only at $82
2. Auto-Defrost Microwave only at $150
3. Simple Microwave at $68, Auto-Defrost Microwave at $135
Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of women. For simplicity, you can assume this
means that there are two women, and no men.
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