tasks 2 and 3

Case Study: Part 1 The prototype is ready. Mat is testing it nights and days. Maria is still not fully satisfied with the quality of the software but she is a perfectionist. James keeps on thinking how to make money out of the innovation. He asked a couple of friends to estimate how much they spend on entertainment (movies, theatre, discos, computer games etc.) versus all other goods and services. Those friends could be categorised into four segments: . Segment A: students, not married and without children . Segment B: students with some family obligation e.g. wife, children, elderly par- ents. . Segment C: graduates who got already a job but they do not have family obligation . Segment D: graduates with family obligation and job He noticed out an interesting relation between the life phase and the entertainment spending (see table 3.5). James did not want to be indelicate so he had not asked about the absolute levels of disposable income but he got information that on average the alumni have three times more money to spend than students. He also asked some questions regarding the pattern of entertainment spending and found out that the budget for entrainment is in most casesLife phase/Segment Entertainment Other goods Savings A. Student/single 60% 10% 0% B. Student/family 5% 95% 0% C. Alumni/job 50% 10% 10% D. Alumni/family & job 15% 75% 10% Table 3.5: Spending structure by customers fixed and decision about allocation of this budget between computer gaming and other depend mainly on relative prices between gaming and bundle of other entertainment options. Simply, the utility from consumption of the entertainment options is the product of the amount of console gaming and other entertainment option (combined) in case of alumnus and product of hours squared in case of students. James asks you to estimate the optimal allocation of time for console gaming for all customer segments. In your analysis assume that: . W corresponds to the students' income. W is a constant and could be estimated if James were more confident. . m; is the budget for entertainment of segment i . By q1 is denoted the amount of hours spent on console gaming per month and q2 is the amount of hours spend on the other entertainment. . p is the price for an hour of gaming The weighted average price of one hour entertainment other than console gaming (e.g. music concert) is 4. Task 1 Based on your analysis recommend James the market segment with the highest usage potential. Discuss the impact of price policy on the substitution between gaming and other entertainment. How did the differences in the utility function between students and graduates influence your results? Task 2 Assuming that W = 100 build the demand curve for every customer segment. Start your analysis with budget constraints and indifference curves. For the sake of simplicity use only three price points for hour of gaming: 3 and 4 and 5.Task 3 Based on the Eurostat data on population, education and marriages try to estimate in hours per year the market size for Move4U in the European Union. You will not find the exact data but some estimations are possible. clearly state our initial assumptions. Estimate how potential market is changing when the different prices are considered. Could you build the demand function for console gaming in the European Union