1). (refer to the title levels of products")

Imagine that you are an online retailer of consumer electronics, and you need to set prices for the products in your online store. You understand that consumers may demonstrate different levels of price sensitivity to the actual product and the augmented product (e.g., handling and delivery services).

Design a consumer experiment to find out which of the two price arrangements you should use for the bundle of the actual product (e.g., a laptop) and the augmented product (handling and delivery) --

1. relatively high price for the actual product, combined with relatively low price for the augmented product, or
2. relatively low price for the actual product, combined with relatively high price for the augmented product.

Describe how you will implement/control the following elements in a consumer experiment.

(a) What is the hypothesis that you want to test with the experiment?

(b) What are the treatments of the independent variable(s)?

(c) How do you plan to implement random assignment of participants to different treatment conditions?

(d) What are dependent variable(s) you plan to record?

(e) What are some of the confounds that you want to control and how?

2)

Holiday Inn has found out through marketing research that the Ed (price elasticity of demand) for its business traveler segment (people who travel for business purposes) is 0.2, and the Ed for its personal traveler segment (people who travel for personal purposes) is 5. Based on the above information, would you recommend that Holiday Inn introduce special room rates periodically to the two segments of its customers? Explain.