You are the manager of a local sporting goods store and recently purchased a shi

Question

You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of ski and ski bindings at a total cost of $30,000 (your wholesale supplier would not let you purchase the skis and bindings separately, nor would it let you purchase fewer than 60 sets). The community in which your store is located consists of many different types of skiers, ranging from advanced to beginners. From experience, you know that different skiers values skis and bindings differently. However, you cannot profitably price discriminate because you cannot prevent resale. There are about 20 advanced skiers who value skis at $350 and ski bindings at $250; 20 intermediate skiers who value skis at $250 and ski bindings at $275, and 20 beginning skiers who value skis at $175 and ski bindings at $325.

Compare the profits earned under two pricing strategies:

A. Selling skis and bindings separately at the profit-maximizing prices.

B. Bundling skis and bindings and selling for one price.

Explanation / Answer

You're going to have to do it at one of those 3 prices for each. So start with skis. at 350 we'd sell 20 so get 7000. at 325 we'd sell 40 so get 13000. at 250 we'd sell 60 so get 15000. I'd sell at 250 to get the most money (we assume keeping gets nothing possible) for bindings at 250 we'd sell 60 so get 15000 at 325 we'd sell 40 so get 13000 at 375 we'd sell 20 so get 7500 So we'd sell at 250 for each. We don't want to and make nothing, but people won't want to buy more than one set.

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