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I need help with this Managerial Economics question, and to solve , I need to use a regression in excel. Here's the question: Your firm

I need help with this Managerial Economics question, and to solve , I need to use a regression in excel. Here's the question:

Your firm offers the EPIX movie package as an add-on tier to their streaming platform. This has only been available for the past couple of years and the firm has tried several different pricing levels to try and maximize profits. They are currently charging $11.79 a month for the package and last month had 10,127 subscribers.

You are to provide a recommendation on a profit maximizing price. To help with this you receive information from 25 different prior months covering a variety of price offerings.You also have data on the licensing costs as well as general overhead and administrative costs. The data are listed in pricing order and are not chronological.

Provide your answer as a business memo where you succinctly state your conclusions and how you came to those conclusions. You should state your recommended price along with the quantity of sales you expect at that price. You should also mention how you expect revenue to change from the last month, how much profit you expect the firm to earn, how this compares to what was earned last month, and what you would expect if you maintained current pricing. The details supporting your conclusions (regressions, computations, and more detailed explanations) should be in an appendix.

Here is a list of the key steps in conducting your analysis:

  • Using the data, estimate the demand for the EPIX movie package. Remember demand is in the form of "Q=" where P is the variable you can adjust and control on the right-hand side. You will need to carefully consider which information should, and should not, be included in demand. Consider both a linear specification and a log-linear specification and determine which you would recommend using. Make sure to include both specifications in your appendix and explain how you determined the preferred specification.
  • Based on your preferred estimated demand, find the profit maximizing price. This is a firm with some pricing power, so follow the optimal pricing approach from the monopoly and monopolistic competition lecture.You will need your demand regression results. You will also need to determine the cost structure.You can find the cost curve using a regression, but it is also possible to determine the cost by carefully considering the cost data in other ways. Be sure to show your cost determination and the computations done to choose a profit maximizing price in your appendix.
  • Based on your recommended price, determine the quantity of subscribers you expect. Based on your recommended price and expected quantity, determine how much you expect revenue and profit to change from last month.
  • Lastly, based on your estimated demand, what profit level would you expect the firm to earn next month if they kept their price at the current level? If this different from the profit they earned last month, why might that be the case?

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