This case is about a specialty apparel retailer who operates a small regional network of stores. The retailer sells clothes that target children in their preadolescence stage (i.e., ages 9 to 13) and should appeal not only to the youngsters but also to their legal guardians who typically sponsor the purchases. In an attempt to better understand the likely price/demand relationship for a representative item, the retailer devised and executed a preseason, in-store price experiment intended to capture the price sensitivity of customers shopping for such an item. At the time of the experiment, it cost the retailer$22 to purchase the item. The intention of the product managers was to open the season with a product retail price of$34.95, which could later be adjusted based on how the market responded to this initial price. The relatively low gross margin of 37.05% ($12.95) is atypical of the apparel retail industry and reflects conditions relevant to this product only. The experiment was run for a given period of time in a few selected stores that were thought to be representative of the entire chain and accounted for individual store intricacies. The price points at which the product was offered were chosen such that no stores in close proximity featured the product at conflicting prices. Across all stores, the aggregate sales are shown in Table 1.

Price ($) 29.95 3 32.45 34.95 37.45 39.95 Sales 71 57 46 33 27 Table 1: In-store price experiments results