The objective of this assignment is to enhance your understandings on how to manage price-sensitive demands.

The first set of questions is based on the static pricing model in the spreadsheet "Pricing_Static.xlxs". In this model, data analysis shows that a 15% discount leads to a demand ratio of 1.44 and a 25% discount leads to a demand ratio of 2.02, respectively. You should understand the analysis in the spreadsheet, use it as a baseline, and modify it to answer the following questions.

Q1. [20%] Suppose that, in addition to the 15% and 25% discounts (and the corresponding demand ratios of 1.44 and 2.02), the retailer knows that a 20% discount will lead to a demand ratio of 1.8. Assume everything else remains the same. Modify the spreadsheet to analyze the optimal static pricing policy and the corresponding best OUT level.

Please report the results (the best OUT level, and the resulting total profit), and discuss the effect of having more discount rates (compared to the baseline with two discount rates).

Q2. [20%] Going back to the baseline case in "Pricing_Static.xlxs." Suppose the retailer would take a markdown pricing strategy by charging a price of $10 during the first 30 days (i.e., day 1-30) and a price $7.5 during the last 30 days (i.e., day 111-140), while a price of $8.5 during other days. Modify the spreadsheet to analyze the order-up-to level.

Please report the results (the optimal price and best OUT level, and the resulting total profit), and compare the markdown pricing and the static pricing.