Professional or Home but not both). Suppose that your objective is to maximize the total revenue from selling the software. Further, you do not know the identity of either buyer and you must sell by posting one price for Link Professional and another price for Link Home. Each buyer seeks to maximize her consumer surplus and may buy Link Professional or Link Home or neither depending on the prices that you post. Please show all intermediate steps and clearly explain your reasoning. i. What is the optimal price and resulting revenue under the following scenario? What (if anything) would each customer buy? ii. If you could identify each buyer and make targeted offers, what price would you offer to each and how much revenue would you earn? What (if anything) would each customer buy Scenario The willingness to pay (WTP) of the 2 potential buyers is: WTP of Buyer A WTP of Buyer B Link Professional 600 500 Link Home 400 300

Professional or Home but not both). Suppose that your objective is to maximize the total revenue from selling the software. Further, you do not know the identity of either buyer and you must sell by posting one price for Link Professional and another price for Link Home. Each buyer seeks to maximize her consumer surplus and may buy Link Professional or Link Home or neither depending on the prices that you post. Please show all intermediate steps and clearly explain your reasoning. i. What is the optimal price and resulting revenue under the following scenario? What (if anything) would each customer buy? ii. If you could identify each buyer and make targeted offers, what price would you offer to each and how much revenue would you earn? What (if anything) would each customer buy Scenario The willingness to pay (WTP) of the 2 potential buyers is: WTP of Buyer A WTP of Buyer B Link Professional 600 500 Link Home 400 300

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose you’re relatively new in business and want to launch your product in the market.You have a great deal of flexibility in how you set your prices, you may want to considerpricing for optimum market penetration. This means that you initially sell your product ata low introductory price P0 (say) to attract new customers, then raise prices once you’vesecured your share in the market. Determining the most appropriate pricing model for yourbusiness is tricky and takes considerable research.If it is known that change in price P depends upon the demand D and Supply S of yourproduct, where both D and S are linearly related to price P.(a) Write the differential equation the describes the change in price.(b) Describe the pattern of change of price for different phases.(c) For what values of parameter, you have equilibrium price (Hint: Recall equilibriumsolution of differential equations)
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