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You have been hired by the software company Bug-Free Solutions (BFS) to provide advice for their pricing. The company's best-selling application currently comes in 3
You have been hired by the software company Bug-Free Solutions (BFS) to provide advice for their pricing. The company's best-selling application currently comes in 3 levels of quality: basic, medium, and best. After much legwork, you have determined that BFS has three types of customers, whose willingness to pay for each quality increment is listed in the table below. The last column indicates the number of buyers of each type. The first 3 columns indicate the willingness to pay for each quality increment. For example, each buyer of type 2 is willing to pay a total of $100 + $30 + $5 = $135 for the best quality version of the application. The buyers' types are not observable, so all BFS can do is offer a menu of price-quality pairs and let each buyer select one that he or she likes best. The cost of developing the application is sunk, and you should aim to maximize BFS's revenue. What quality levels should BFS offer, and at what prices? You have been hired by the software company Bug-Free Solutions (BFS) to provide advice for their pricing. The company's best-selling application currently comes in 3 levels of quality: basic, medium, and best
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