Imagine that Daimler is considering whether to sell unpainted Smart Cars and reduce the list price by $1,500.

The Smart Car exterior consists of ten removable panels that can be easily painted. Buyers could paint their own panels, leave the panels unpainted, or pay the dealer an additional fee to personalize their cars by having the panels custom finished in almost any color or design. What are the advantages and disadvantages of this pricing idea?

Tiny car, tiny price tag, tiny gasoline bill. The Smart Car, made by Daimler’s Mercedes Car Group in Hambach, France, first appeared on U.S. roads in 2008, just as prices at the gas pump were hitting record highs week after week. The timing could not have been better. Tired of emptying their wallets every time they filled their gas tanks, many U.S. drivers were thinking about downsizing from a big sport-utility vehicle or pickup truck to a smaller vehicle. But were they ready for a 106-inch-long car that seats only two people? Daimler was ready to find out.