Question
Stata is an integrated software package used to satisfy data science needs, and is often used by college students and individuals in business. Stata offers
Stata is an integrated software package used to satisfy data science needs, and is often used by college students and individuals in business. Stata offers a "Stata/IC" version and a "Stata/SE" version of the software. The main difference is that Stata/SE allows for about 16 times more variables in general and about 14 times more explanatory variables in a model. The software has already been developed, so the marginal cost of another software license sold is zero. Suppose the average maximum willingness to pay for the two versions is summarized in the following table for the two groups:
Software Version | Students | Business Users |
Stata/SE | $180 | $1,000 |
State/IC | $100 | $200 |
A)Suppose that based on this information, Stata decides to charge $1,000 for Stata/SE and $100 for Stata/IC. Why might this be a bad idea?
B) What price should Stata charge for each version in order to maximize profits?
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