1.Even through pork bellies trade in a perfectly competitive market, Oscar Meyer bacon enjoys strong brand loyalty that enables the company to employ pricing strategies for the product. The company is looking for a new brand manager for the bacon division, so they ask applicants to come up with a suggested pricing strategy as a way to evaluate their skills. Evaluate each idea below and recommend the one with the best chance of succeeding given the following market information.

oThe combined estimated demand curve for bacon (both rural and urban) is Qd = 6515 - 715P (inverse demand is P = 9 - .0014Qd) This equation is a little off because it has to be linear.

oThe estimated demand curve for bacon in rural areas is Qd= 1515 - 252.5P (inverse demand is P= 6 - .00396Qd)

oThe estimated demand curve for bacon in urban areas is Qd = 5000 - 500P (inverse demand is P=10 -.002Qd)

oThe marginal cost of producing bacon is $4 (note: MC is constant, so MC=ATC=4.)

oBased on a reliable survey of over 10,000 shoppers:

the average price men are willing to pay for hot dogs is $3 while the average price

women are willing to pay for hot dogs is $2.50 survey

the average price men are willing to pay for bacon is $7 while the average price women are willing to pay for bacon is $6.

Pricing Strategy ideas presented:

1.Profit maximize using one price.

2.Bundling bacon and hot dogs for $9

Segmenting by Urban/Rural locations instead of charging one price for both areas.