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 $75 2$ 2$ 2$ 2. Auto-Defrost Microwave only at $130 $ 2$ 2$ 3. Simple Microwave at $55, Auto-Defrost Microwave at $109 2$ 2$ 2$ Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of men. For simplicity, you can assume this means that there are two men, and no women. Under these conditions, pricing strategy would maximize revenue for the manufacturer.

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 $75 2$ 2$ 2$ 2. Auto-Defrost Microwave only at $130 $ 2$ 2$ 3. Simple Microwave at $55, Auto-Defrost Microwave at $109 2$ 2$ 2$ Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of men. For simplicity, you can assume this means that there are two men, and no women. Under these conditions, pricing strategy would maximize revenue for the manufacturer.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 14.1IP

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1. Hertz and other car rental companies charge much more to rent luxury cars such as Ferraris andBentleys than to rent compact cars such as the Toyota Yaris or Chevrolet Sonic. Is this pricediscrimination? Explain 2. A Grocery store issued frequent-buyer cards to willing customers and collected information about their purchases. How should a manager use this information to offer customized discount coupons to individuals?
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group.C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group. C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Exercise 4.3 Show why optimal third-degree price discrimination requires that the marginal income for each group of consumers be equal to the marginal cost. Use this condition to explain how a firm must alter its prices and total output if the demand curve of one of the consumer groups shifts outward, so that the marginal income corresponding to that group increases. (TdeR. 5, cap. 11 de PR9)
GameZone, a video games store, is considering the best way to price two new games – a first-person shooter (FPS) and a racing game. There are four types of consumers that might buy the games with roughly equal numbers of each type, and their willingness to pay (WTP) for each game is detailed in the table below (assume that the willingness-to-pay for a second game of the same type is zero). How should Gamezone price the two games separately to maximise revenue? How should Gamezone price a bundle of both games to maximise revenue? Is there an alternative (involving bundling) that generates more revenue than either single prices or a bundle alone? Under what condition/s is bundling likely to increase profits for a firm? Consumer Type WTP for FPS game WTP for racing game A $120 $70 B $70 $120 C $160 $10 D $10 $160
Explain the type of pricing strategy that you as the manager of a company would implementfor Good X and Good Y with the following price elasticity of demand co efficients. Usediagrams to motivate your answer.a). Good X: 2.3 b). Good Y: 0.6
The manager of a convenience store competes in a monopolistically competitive market and buys cola from a supplier at a price of $1.25 per liter. The manager thinks that because there are several supermarkets nearby, the demand for cola sold at her store is slightly more elastic than the elasticity for the representative food store reported in Table (which is −3.8). Based on this information, she perceives that the elasticity of demand for cola sold by her store is −4. What price should the manager charge for a liter of cola to maximize profits?
Recently, the National Franchise Association (NFA) filed a lawsuit against Burger King Corporation (BKC) over the pricing of products on its value menu, and specifically its $1 double cheeseburger promotion. The NFA is group that represents more than 80% of Burger King Franchise owners. Here are excerpts from the Associated Press report on the case: The National Franchise Association, a group that represents more than 80 percent of Burger King's U.S. franchise owners, said the $1 promotion forces restaurant owners to sell the quarter-pound burger with at least a 10-cent loss. While costs vary by location, the $1 double cheeseburger typically costs franchisees at least $1.10, said Dan Fitzpatrick, a Burger King franchisee from South Bend, Ind. who is a spokesman for the association. That includes about 55 cents for the cost of the meat, bun, cheese and toppings. The remainder typically covers expenses such as rent, royalties and worker wages. "New math, or old math, the math just…
Exercise 5.5 In this unit we have seen that monopolistically competitive firms could increase the amount they produce and reduce the ATC of production. Why don't they?
b) The manager could have charged Joe a single price per round. How much extra profit does theclub earn by using two-part pricing?c) Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club.The manager believes that Susan’s inverse demand function is ? = 100 − 2?. The manager has apolicy of offering each member of a married couple the same two-part prices, so he offers themboth a new deal. What two-part pricing deal maximizes the club’s profit?d) Will this new pricing have a higher or lower access fee and per-unit fee than in Joe’s originaldeal? How much more would the club make if it charged Susan and Joe separate prices?
Suppose you run a marketing survey and find you have two types of customers high-value customers willing to pay 16 and low-va consumers willing to pay just 10. Your survey tells you that there are equal numbers of high- and low- value customers. Obviously , have two possible options price high (16) and sell only to the high value group, or price low (10) and sell to everyoneThe costs incurred is 5 per unit and sales only happen to high -value consumers 50 % of the timeWhich price should you choose ? Select the correct response price high price low it depends price both high and low
Suppose the following data represent the market demand for catfish: Price (per unit) $20 19 18 17 16 15 14 13 12 11Quantity demanded (units per day) 12 13 14 15 16 17 18 19 20 21Total revenue — — — — — — — — — —Marginal revenue — — — — — — — — — —Compute total and marginal revenue to complete the table above. At what rate of output is total revenue maximized? At what rate of output is MR less than price? At what rate of output does MR first become negative? Graph the demand and MR curves.