Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its dolls: lowvalue consumers and high-value consumers. Each of the low-value consumers tends to purchase one doll and one accessory, with a total willingness to pay of $80. Each of the high-value consumers buys one doll and two accessories and is willing to pay $157 in total. Mattel is currently considering two pricing strategies: - Strategy 1: Sell each doll for $40 and each accessory for $40 - Strategy 2: Sell each doll for $3 and each accessory for $77 In the following table, indicate the revenue for a low-value and a high-value customer under strategy 1 and strategy 2. Then, assuming each strategy is applied to one low-value and one high-value customer, indicate the total revenue for each strategy. Revenue from Low-Value Revenue from High-Value Total Revenue from Customers Customers Strategy $80 Value, 1 Accessory $157 Value, 2 Accessories ($) ($) ($) Strategy 1 s40 doll + $40 - accessory Strategy 2 $3 doll + $77 accessory The strategy that generates the most revenue is strategy V 2. Individual Problems 14-2 A local Pilates studio recently began offering a monthly subscription service for its patrons. Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session. Session Willingness to Pay lst $70 2nd $60 3rd $50 4th $40 5th $30 6th $20 Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the studio, per session, is constant at $10. At a price of $55.00 per session, the number of sessions demanded onsumer would be . At this price and quantity, consumer surplus Suppose the studio has devised a new pricing scheme for consumer mand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $202.50 and can have up ions total. Using this subscription pricing model, this consumer would demand V sessions. Under this scenario, consumer surplus is and producer surplus is $ . (Hint: For consumer surplus, consider how much total value the consumer places on all sessions, versus the total price paid.) A manufacturer of a wearable fitness tracker has identified two groups of consumers for its product: occasional exercisers and competitive runners. Occasional exercisers, on average, have lower values for fitness trackers than competitive runners. Additionally, occasional exercisers attribute almost no extra value to a \"friends\" feature that lets you keep track of and compete with other users, while competitive runners, on average, value the friends feature. The manufacturer is considering introducing two different models. The manufacturer has determined that occasional exercisers value a fitness tracker without the friends feature at $70 and one with the friends feature at $80, while competitive runners value the two versions at $80 and $150. Suppose the manufacturer is considering three pricing strategies: 1. Market 3 single type of fitness tracker with the friends feature at $80 to both occasional exercisers and competitive runners. 2. Market a single type of fitness tracker with the friends feature at $150 to only competitive runners. 3. Market a fitness tracker without the friends feature to occasional exercisers for $70. In addition, market a fitness tracker with friends to competitive runners at $139. For simplicity, assume there is only one occasional exerciser and one competitive runner. Further assume that if the price of a fitness tracker is equal to an individual's willingness to pay, the individual will purchase the tness tracker. Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy. Revenue from Revenue from Occasional Competitive Strategy Exercisers Runners 1. Only fitness tracker with friends feature at $80 to both customers $ I$ 2. Only fitness tracker with friends feature at $150 to runners. $ $ 3. Tracker without the friends feature t- ers for $70, tracker with friends feature to runners for $139. $ l$ Suppose the market for the fitness track made up entirely of competitive runners. For simplicity, assume the market is made up of two competitive runners. Under these conditions, pricing strategy V would maximize revenue for the manufacturer