I’m working on a economics exercise and need guidance to help me study.
A manufacturer of microwaves has discovered that female shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Male shoppers generally value microwaves more than women do and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $69 and one with auto-defrost at $120, while women value a simple microwave at $51 and one with auto-defrost at $69.
Suppose the manufacturer is considering three pricing strategies:
|1.||Market a single microwave, with auto-defrost, at $69, to both men and women.|
|2.||Market a single microwave, with auto-defrost, at $120, to only men.|
|3.||Market a simple microwave to women, at $51. Market a microwave, with auto-defrost, to men at $101.|
For simplicity, assume there is only 1 man and 1 woman and that if the price of a microwave is equal to an individual’s willingness to pay, the individual will purchase the microwave.
Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy.
|Strategy||Revenue from Men||Revenue from Women||Total Revenue from Strategy|
|1. Auto-Defrost Microwave only at $69|
|2. Auto-Defrost Microwave only at $120|
|3. Simple Microwave at $51, Auto-Defrost Microwave at $101|
Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of men. For simplicity, you can assume this means that there are two men, and no women.
Under these conditions, pricing strategy…………… would maximize revenue for the manufacturer.