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We are choosing between four automobiles (j=1,2,3,4) with prices of $25,000 (j=1), $22,000 (j=2), $19,000 (j=3), and $27,000 (j=4). The variable PriceK in your utility
We are choosing between four automobiles (j=1,2,3,4) with prices of $25,000 (j=1), $22,000 (j=2), $19,000 (j=3), and $27,000 (j=4). The variable PriceK in your utility equation is the price in thousands of dollars (so for j=1, PriceK = 25). The alternative-specific constants for each alternative are 0, 2, 1, and 3 (for j = 1,2,3,4, respectively). Beta is -0.1. Given this information, calculate the probability of purchasing alternative 4. Then, calculate the probability of purchasing alternative 4 if the price is reduced by $2,000, to $25,000. Which appears to be the more profitable price point (given both probability and price), $25K or $27K
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