Consumer Valuations for Two Versions of the Honda Pilot Consumer Type Honda Pilo

Question

Consumer Valuations for Two Versions of the Honda Pilot

Consumer Type

Honda Pilot 4WD LX

Honda Pilot 4WD Touring

Highly price-sensitive

$32,000

$37,000

Less price-sensitive

$33,500

$44,000

Reference: Ref 10-9

Table 10.2

Consumer Valuations for Two Versions of the Honda Pilot

Consumer Type

Honda Pilot 4WD LX

Honda Pilot 4WD Touring

Highly price-sensitive

$32,000

$37,000

Less price-sensitive

$33,500

$44,000

Reference: Ref 10-9

(Table 10.2) Suppose that Honda prices the Pilot 4WD LX at $30,000 and the Pilot 4WD Touring at $40,000. Are these prices incentive-compatible? Yes, each consumer type receives the lowest consumer surplus from buying the car designed for its group. No, the highly price-sensitive consumer receives more consumer surplus from the LX version. No, the less price-sensitive consumer receives more consumer surplus from the LX version. Yes, each consumer type receives the highest consumer surplus from buying the car designed for its group.

Explanation / Answer

No, the highly price-sensitive consumer receives more consumer surplus from the LX version.

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