You are a developer that has just finished writing a new game and would like to publish it with this platform’s store. You do not expect to incur in any more costs developing the product. The app store typically keeps 20% of your revenue but, in order to give an incentive to sellers, the app store will only charge 15% of revenue to successful apps selling more than 60,000 units a year, and 10% to top-selling apps with more than 85,000 units sold. Assume that there are no extra (in-game) charges beyond the price to acquire the game. Using the data in the table below, at what price should you sell your game at? (Don't forget to take into account elasticity) Quantity Price Total Revenue To Store Revenue Elasticity 96261.14 $ 0.99 $ 95,298.53 10% $ 85,768.67 -0.11 85920.32 $ 1.99 $ 170,981.43 10% $ 153,883.29 -0.24 75579.50 $ 2.99 $ 225,982.70 15% $ 192,085.29 -0.41 65238.68 $ 3.99 $ 260,302.33 15% $ 221,256.98 -0.63 54897.86 $ 4.99 $ 273,940.31 20% $ 219,152.25 -0.94 44557.04 $ 5.99 $ 266,896.66 20% $ 213,517.33 -1.39 34216.22 $ 6.99 $ 239,171.37 20% $ 191,337.09 -2.11 23875.40 $ 7.99 $ 190,764.43 20% $ 152,611.55 -3.46 13534.58 $ 8.99 $ 121,675.86 20% $ 97,340.69 -6.87 3193.76 $ 9.99 $ 31,905.64 20% $ 25,524.52 -32.35

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

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 6MC

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You are a developer that has just finished writing a new game and would like to publish it with this platform’s store. You do not expect to incur in any more costs developing the product. The app store typically keeps 20% of your revenue but, in order to give an incentive to sellers, the app store will only charge 15% of revenue to successful apps selling more than 60,000 units a year, and 10% to top-selling apps with more than 85,000 units sold. Assume that there are no extra (in-game) charges beyond the price to acquire the game.

Using the data in the table below, at what price should you sell your game at? (Don't forget to take into account elasticity)

Quantity	Price	Total Revenue	To Store	Revenue	Elasticity
96261.14	$ 0.99	$ 95,298.53	10%	$ 85,768.67	-0.11
85920.32	$ 1.99	$ 170,981.43	10%	$ 153,883.29	-0.24
75579.50	$ 2.99	$ 225,982.70	15%	$ 192,085.29	-0.41
65238.68	$ 3.99	$ 260,302.33	15%	$ 221,256.98	-0.63
54897.86	$ 4.99	$ 273,940.31	20%	$ 219,152.25	-0.94
44557.04	$ 5.99	$ 266,896.66	20%	$ 213,517.33	-1.39
34216.22	$ 6.99	$ 239,171.37	20%	$ 191,337.09	-2.11
23875.40	$ 7.99	$ 190,764.43	20%	$ 152,611.55	-3.46
13534.58	$ 8.99	$ 121,675.86	20%	$ 97,340.69	-6.87
3193.76	$ 9.99	$ 31,905.64	20%	$ 25,524.52	-32.35

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