Chatbot, the algorithm that simulates human conversations, is a new application of artificial intelligence with unprecedented business potentials. One promising application of the chatbot is to replace human salesman to make outbound sales calls. This is because most outbound calls have relatively standard conversation content (consider the calls from insurance companies or credit card companies you received in the past) for computers to handle. Company SalesBot is the market leader of the chatbot. In the setting of structured outbound calls, without disclosure, customers could not distinguish whether the call is from a human salesman or a chatbot.

A business software company X currently is heavily relying on its call center to call potential clients and promote their products. The company X hires 100 employees in the call center to make phone calls, which costs $3,600,000 a year. The call center can bring 2,000 clients a year, and on average, each client contributes $10,000 profits to the company a year.

a) In a meeting with the company X, SalesBot has demonstrated the viability of using chatbot to make sales calls. Since the chatbot can make way more calls than human salesmen, it is estimated that the chatbot can bring 5,000 clients a year. On average, each client contributes $9,000 profits to company X a year. Now SalesBot is considering setting the price for company X. What is the maximum price (in terms of dollars a year) company X would be willing to pay for the chatbot?

$3,603,000

$0

$28,600,000

$8,100,000

b) Suppose Salesbot realized that the company X can outsource the salesforce to the company Y, which is also running a call center using cheaper labors. The company Y charges $1,000,000 a year to conduct sales calls for company X. The company Y can potentially bring 2500 clients to the company X. Each client on average contributes $10,000 profits to company X. With this information, what is the maximum price (in terms of dollars a year) company X would be willing to pay for the chatbot?

$0

$7,600,000

$1,800,000

$21,000,000