A manufacturer produces two types of computer software, Word processing (W) and
ID: 1157744 • Letter: A
Question
A manufacturer produces two types of computer software, Word processing (W) and Spreadsheet (S), which is offered to two different retail outlets (#1 and #2). The following table shows the maximum price each retail outlet is willing to pay for each individual software product.
Product W Product S
Retail #1 $170 $105
Retail #2 $95 $135
What is the optimal pricing strategy that will maximize revenue for the manufacturer, given the maximum the retail outlets are willing to pay?
Bundle both products (W and S) and sell them at $275.
Price product W at $95 and Product S at $105.
Price product W at $170 and Product S at $170.
Price product W at $170 and Product S at $135.
Bundle both products (W and S) and sell them at $230.
a.Bundle both products (W and S) and sell them at $275.
b.Price product W at $95 and Product S at $105.
c.Price product W at $170 and Product S at $170.
d.Price product W at $170 and Product S at $135.
e.Bundle both products (W and S) and sell them at $230.
Explanation / Answer
e) Bundle both products (W and S) and sell them at $230 .
We can see that Retail 1 is willing to pay a combined price of 170+105 = 275$ and Retail 2 = 95+135 = 230$
So selling at 230$ the combined bundle will optimize revenue .
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