Question
A manufacturer of microwaves has discovered that male shoppershave little value for microwaves and attribute almost no extravalue to an auto-defrost feature. Female shoppers generally
A manufacturer of microwaves has discovered that male shoppershave little value for microwaves and attribute almost no extravalue to an auto-defrost feature. Female shoppers generally valuemicrowaves more than men do and attribute greater value to theauto-defrost feature. There is little additional cost toincorporating an auto-defrost feature. Since men and women cannotbe charged different prices for the same product, the manufactureris considering introducing two different models. The manufacturerhas determined that men value a simple microwave at $68 and onewith auto-defrost at $86, while women value a simple microwave at$86 and one with auto-defrost at $154.
Suppose the manufacturer is considering three pricingstrategies:
1. | Market a single microwave, with auto-defrost, at $86, to bothmen and women. |
2. | Market a single microwave, with auto-defrost, at $154, to onlywomen. |
3. | Market a simple microwave to men, at $68. Market a microwave,with auto-defrost, to women at $135. |
For simplicity, assume there is only 1 man and 1 woman and thatif the price of a microwave is equal to an individual's willingnessto pay, the individual will purchase the microwave.
Use the following table to indicate the revenue from men, therevenue from women, and the total revenue from each strategy.
Strategy | Revenue from Men | Revenue from Women | Total Revenue from Strategy |
---|---|---|---|
1. Auto-Defrost Microwave only at $86 | |||
2. Auto-Defrost Microwave only at $154 | |||
3. Simple Microwave at $68, Auto-Defrost Microwave at $135 |
Suppose that, instead of one man and one woman, the market forthis microwave consisted entirely of women. For simplicity, you canassume this means that there are two women, and no men.
Under these conditions, pricing strategy (?) would maximizerevenue for the manufacturer.
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