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.
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