1. Suppose your marketing department does a survey of potential users and finds
ID: 1218100 • Letter: 1
Question
1. Suppose your marketing department does a survey of potential users and finds that these users place the following values on the two versions of your software: Software Version Home Users Commercial Users Full-featured version $175 $225 Disabled version $150 $200 If the numbers of home and commercial users are equal, and you cannot distinguish between commercial and home users, what is the most profitable pricing strategy? Assume the MC of production is zero. Show how you arrive at your ANSWER for EACH of the following SCENARIOS.
a. Sell to only commercial users
b. Sell to only home users
c. Sell to both groups using a single price
d. Sell to both groups at two different prices (assume you can distinguish users in this scenario).
Explanation / Answer
Full-featured version Disabled version
Home Users $175 $150
Commercial Users $225 $200
Profitable stragey:
a. Sell to only commercial users : full version as it values $225 > $200
b. Sell to only home users: full featured version as it values $175 > $150
c. Sell to both groups using a single price : $225 >$175 (equal number of consumer so higher prices will give higher profit.)
d. Sell to both groups at two different prices (assume you can distinguish users in this scenario).
charge $175 to home users and $225 to commercial users.
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