Problem 2 (65 points) A small clothing retailer currently sells sneakers and is re-evaluating the price that they charge per pair of sneakers. They have a single style of sneaker that is their top seller and they currently charge $60 per pair. They have conducted a market study in which they collected WTP from 150 different customers. Use the Excel file titled OPM344 Homework Assignment 2 on the Problem 2 tab to answer the following questions. a. What is the maximum, minimum and average WTP for the sneakers? b. Using linear regression, determine what the demand function is for this product. c. Using the demand function (NOT the list of 150 sample WTP), how many customers currently purchase the sneakers? What is the current revenue from sneakers? d. Using the demand function, create a basic price optimization problem to solve for the optimal price. What is the optimal price to charge? What is the total revenue at this price? What is the total demand at this price? e. If the company decides to change to the optimal price, what will be the change in demand? Revenue? What are two NON-QUANTITATIVE consequences of the company switching to the new price? g. If the company knows that for every pair of sneakers that they hold in inventory in the store, it costs the $10 (for space dedicated to the sneakers and the decrease in floor space used for other products), should they switch their price? Justify your answer. Problem 2 (65 points) A small clothing retailer currently sells sneakers and is re-evaluating the price that they charge per pair of sneakers. They have a single style of sneaker that is their top seller and they currently charge $60 per pair. They have conducted a market study in which they collected WTP from 150 different customers. Use the Excel file titled OPM344 Homework Assignment 2 on the Problem 2 tab to answer the following questions. a. What is the maximum, minimum and average WTP for the sneakers? b. Using linear regression, determine what the demand function is for this product. c. Using the demand function (NOT the list of 150 sample WTP), how many customers currently purchase the sneakers? What is the current revenue from sneakers? d. Using the demand function, create a basic price optimization problem to solve for the optimal price. What is the optimal price to charge? What is the total revenue at this price? What is the total demand at this price? e. If the company decides to change to the optimal price, what will be the change in demand? Revenue? What are two NON-QUANTITATIVE consequences of the company switching to the new price? g. If the company knows that for every pair of sneakers that they hold in inventory in the store, it costs the $10 (for space dedicated to the sneakers and the decrease in floor space used for other products), should they switch their price? Justify your
