II. Competitive Pricing
Retailers often sell different brands of competing products. Depending on the joint demand for the products, the retailer may be able to set prices that regulate demand and, therefore, influence profits.
Suppose HOME-ALL, Inc., a national chain of home improvement retailers, sells two competing brands of motion sensor outdoor light sets, Dark-B-Gone 100 and Croyle & James, which the chain purchases for $8 per set and $10 per set, respectively. HOME-ALL’s research department has determined the following two monthly demand equations for these light sets:
where D is hundreds of Dark-B-Gone 100 light sets demanded at per set and C is hundreds of Croyle & James light sets demanded at $c per set. For what prices should HOME-ALL sell these light sets in order to maximize its monthly profit on these items?
To answer this question, complete the following.
Write a brief report to management that details your pricing recommendations and justifies them.
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