Question
A chocolate manufacturer can produce normal or gourmet chocolate bars at a per-unit cost of 1 for normal bars and 3 for gourmet bars.. There
A chocolate manufacturer can produce normal or gourmet chocolate bars at a per-unit cost of 1 for normal bars and 3 for gourmet bars.. There are two types of chocolate consumers in the market, light consumers of chocolate (a share 0<<1 of the population) and heavy consumers of chocolate (1 of the population). Light consumers are willing to pay up to $4 for a normal bar, and up to $5 for a gourmet bar. Heavy consumers are willing to pay up to $5 for a normal bar, and $8 for a gourmet bar. Assume the chocolate manufacturer can price discriminate and maximises expected per-customer profits. Also assume that consumer payoffs equal willingness to pay minus price paid, that a consumer buys at most one chocolate bar, and that a consumer who does not buy any chocolate gets a payoff of 0. Wherever rounding is needed, please round to 3 decimal points. a) If the chocolate manufacturer chooses the optimal separating menu, what price would he set for a normal bar? Answer for part 1 b) If the chocolate manufacturer chooses the optimal separating menu, what price would he set for a gourmet bar? Answer for part 2 c) If the proportion of light chocolate consumers is less than ____, the chocolate manufacturer would choose an exclusion menu rather than a separating menu (fill in the blank).
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