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Based on Dobson and Kalish (1988). Chandler Enterprises produces two competing products, A and B. The company wants to sell these products to two groups of customers. The values each customer places on a unit of A and B are shown in the file P04_123.xlsx. Each customer will buy either product A or product B, but not both. A customer is willing to buy product A if she believes that the premium of product A is greater than or equal to the premium of product B and premium of product A is greater than or equal to 0. Here, the “premium” of a product is its value minus its price. Similarly, a customer is willing to buy B if she believes the premium of product B is greater than or equal to the premium of product A and the premium of product B is greater than or equal to 0. Group 1 has 1000 members, and group 2 has 1500 members. Chandler wants to set prices for each product to ensure that group 1 members purchase product A and group 2 members purchase product B. Determine how Chandler can maximize its revenue.

Based on Dobson and Kalish (1988). Chandler Enterprises produces two competing products, A and B. The company wants to sell these products to two groups of customers. The values each customer places on a unit of A and B are shown in the file P04_123.xlsx. Each customer will buy either product A or product B, but not both. A customer is willing to buy product A if she believes that the premium of product A is greater than or equal to the premium of product B and premium of product A is greater than or equal to 0. Here, the “premium” of a product is its value minus its price. Similarly, a customer is willing to buy B if she believes the premium of product B is greater than or equal to the premium of product A and the premium of product B is greater than or equal to 0. Group 1 has 1000 members, and group 2 has 1500 members. Chandler wants to set prices for each product to ensure that group 1 members purchase product A and group 2 members purchase product B. Determine how Chandler can maximize its revenue.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Based on Dobson and Kalish (1988). Chandler

Enterprises produces two competing products, A

and B. The company wants to sell these products to

two groups of customers. The values each customer

places on a unit of A and B are shown in the file P04_123.xlsx. Each customer will buy either

product A or product B, but not both. A customer

is willing to buy product A if she believes that the

premium of product A is greater than or equal to the

premium of product B and premium of product A

is greater than or equal to 0. Here, the “premium”

of a product is its value minus its price. Similarly,

a customer is willing to buy B if she believes the

premium of product B is greater than or equal to the

premium of product A and the premium of product

B is greater than or equal to 0. Group 1 has 1000

members, and group 2 has 1500 members. Chandler

wants to set prices for each product to ensure that

group 1 members purchase product A and group

2 members purchase product B. Determine how

Chandler can maximize its revenue.

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