Question
2. Simple Pricing versus Two-Part Tariff PricePack is a retailer of peanut butter that is considering switching its business model to a membership-only warehouse club.
2. Simple Pricing versus Two-Part Tariff PricePack is a retailer of peanut butter that is considering switching its business model to a membership-only warehouse club. It sells 80 oz. jars of peanut butter (under its private label 'Medina Collection'), for which the typical household has an annual demand that has been estimated as () = 14 0.8, where is the quantity and is the price of a jar. PricePack's marginal cost of a jar of peanut butter is the $5 it pays the manufacturer.
a) Find PricePack's optimal price of peanut butter (per 80 oz. jar) if it charges no club membership fee.
b) Find PricePack's optimal pricing strategy if it can choose to charge a price per jar of peanut butter, an annual club membership fee, or some combination of both.
c) If the strategies in (a) and (b) are both feasible, which one should PricePack implement?
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