MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 10, Problem 15PAA
To determine
To know: The changes in pricing decision strategy.
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While there is a degree of differentiation between major grocery chains like Albertsons and Kroger, the regular offering of sale prices by both firms for many of their products provides evidence that these firms engage in price competition. For markets where Albertsons and Kroger are the dominant grocers, this suggests that these two stores similtaneously announce one of two prices for a given product: a regular price or a sale price. Suppose that when one firm announces the sale price and the other annoucements the regular price for a particular product, the firm announcing the sale price attracts 1,000 extra customers to earn a profit of $5,000, compared to the $3,000 earned by the firm announcing the regular price. When both firms announce the sale price, the two firms split the market equally (each getting an extrs 500 customers) to earn profits of $2,000 each. When both firms announce the regular price, each company attracts only its 1,500 loyal customers and the firms each earn…
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Your software startup has just completed the latest version of BrainType, a mind-reading word processor that translates thoughts into text. Since you are the cutting-edge frontier, you have no direct competitors. As marketing manager, you must decide how to price BrainType. You commission a study that suggests that there are two markets: professional writers and dabbling hobbyists. There are one million professionals and two million hobbyists. Professionals are willing to pay up to $400 and hobbyists up to $100 for the full-feature version. A scaled-down version is worth $50 to hobbyists and nothing to professionals. Both versions are essentially free to produce. (a) What prices of the two versions generate the most revenue? (b) Suppose that, instead of the scaled-down version, the firm offers an intermediate version worth $200 to professionals and $75 to hobbyists. What prices generate the most revenue now? Is the firm better off selling the intermediate or scaled-down version?
Chapter 10 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
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