Seven years ago, you started a cross-town delivery service. You have two types of delivery services. You
Question:
Seven years ago, you started a cross-town delivery service. You have two types of delivery services. You have a small parcel service for anything that is flat and measures less than 11x17. You have a package service using a 100 lb capacity bike trailer for anything weighting up to 10 lbs. Initially, you charged the same price for each service, but since the beginning of the Covid-19 pandemic you have seen an increased in the demand for your package service. The demand for the package services seems to be more inelastic than the demand for parcels. You are now wondering if you should charge different prices for the parcel and package service or should you segment the market and charge two different prices?
Complete the tables below and determine the best price strategy: price the services
differently in each segment; or continue the one price policy?
Combined Parcels & Packages
Price Parcels and Packages TR MR TC MC MR-MC Profit
100 50 1600
90 120 2300
80 190 3000
70 260 3700
60 330 4400
50 400 5100
40 470 5800
30 540 6500
20 610 7200
10 680 7900
The Parcel Market
Price Parcels TR MR TC MC MR-MC Profit
100 0 1150
90 50 1650
80 100 2150
70 150 2650
60 200 3150
50 250 3650
40 300 4150
30 350 4650
20 400 5150
10 450 5650
The Packages Market
Price Packages TR MR TC MC MR-MC Profit
100 50 450
90 70 650
80 90 850
70 110 1050
60 130 1250
50 150 1450
40 170 1650
30 190 1850
20 210 2050
10 230 2250