Verizon Pricing Problem

Verizon sells cell phone service, Internet access, and FIOS TV service to customers. Customers can buy any combination of these three products (or not buy any). The seven available product combinations include the following:

Internet

TV

Cell Phone

Internet and TV

Internet and Cell Phone

TV and Cell Phone

TV, Cell Phone, and Internet

The attached file Verizon Pricing_Data.xlsx gives the price that 77 representative customers are willing to pay per month for each service. (We assume the willingness to pay for a combination of services is the sum of willingness to pay for individual services included in the combination.) Based on this data, Verizon would like to determine a price for each product combination that maximizes revenue across the sample of 77 customers.

You are asked to find a global optimal solution to this problem by formulating it as a linear program with binary variables. The model is going to have more than 200 variables. The regular Excel built-in Solver will not be able to solve this problem.

PLEASE NOTE: formulate a LINEAR program with binary constraint !!!!!!!!

Customer Valuations Internet TV Cell Phone

1 $3.50 $7.00 $3.50 2 $17.50 $35.00 $3.50 3 $28.00 $28.00 $49.00 4 $70.00 $70.00 $0.00 5 $0.00 $7.00 $14.00 6 $0.00 $70.00 $0.00 7 $21.00 $35.00 $10.50 8 $7.00 $21.00 $0.00 9 $5.25 $7.00 $2.10 10 $21.00 $28.00 $28.00 11 $35.00 $49.00 $21.00 12 $21.00 $21.00 $21.00 13 $14.00 $35.00 $21.00 14 $14.00 $35.00 $14.00 15 $70.00 $0.00 $49.00 16 $7.00 $35.00 $14.00 17 $21.00 $35.00 $42.00 18 $20.65 $34.65 $34.65 19 $1.75 $21.00 $0.00 20 $21.00 $17.50 $21.00 21 $27.65 $34.65 $41.65 22 $7.00 $0.00 $28.00 23 $21.00 $35.00 $10.50 24 $27.65 $69.65 $27.65 25 $35.00 $70.00 $35.00 26 $14.00 $35.00 $7.00 27 $21.00 $35.00 $28.00 28 $7.00 $70.00 $0.00 29 $3.50 $7.00 $10.50 30 $0.00 $21.00 $14.00 31 $21.00 $56.00 $35.00 32 $49.00 $105.00 $0.00 33 $70.00 $70.00 $140.00 34 $21.00 $105.00 $14.00 35 $21.00 $35.00 $14.00 36 $0.00 $140.00 $0.00 37 $0.00 $35.00 $0.00 38 $7.00 $35.00 $21.00 39 $35.00 $35.00 $35.00 40 $21.00 $31.50 $17.50 41 $7.00 $21.00 $7.00 42 $35.00 $35.00 $35.00 43 $28.00 $70.00 $70.00 44 $21.00 $0.00 $14.00 45 $35.00 $35.00 $35.00 46 $35.00 $49.00 $21.00 47 $70.00 $70.00 $35.00 48 $5.25 $17.50 $8.75 49 $0.00 $35.00 $0.00 50 $21.00 $35.00 $35.00 51 $24.50 $14.00 $14.00 52 $24.50 $35.00 $24.50 53 $21.00 $35.00 $52.50 54 $35.00 $21.00 $70.00 55 $7.00 $7.00 $14.00 56 $7.00 $7.00 $7.00 57 $35.00 $0.00 $35.00 58 $175.00 $210.00 $0.00 59 $14.00 $0.00 $0.00 60 $35.00 $49.00 $14.00 61 $10.50 $7.00 $7.00 62 $7.00 $14.00 $3.50 63 $175.00 $350.00 $70.00 64 $100.00 $14.00 $14.00 65 $12.25 $35.00 $0.00 66 $35.00 $42.00 $42.00 67 $35.00 $56.00 $0.00 68 $35.00 $42.00 $0.00 69 $42.00 $52.50 $7.00 70 $21.00 $21.00 $7.00 71 $27.65 $48.65 $27.65 72 $80.00 $56.00 $35.00 73 $80.00 $7.00 $0.00 74 $35.00 $35.00 $56.00 75 $21.00 $28.00 $28.00 76 $0.00 $42.00 $7.00 77 $35.00 $35.00 $1.75