Cyberelectronics produces three products cyberdesktops, cyberlaptops and cyberca
ID: 1127350 • Letter: C
Question
Cyberelectronics produces three products cyberdesktops, cyberlaptops and cybercameras which sells to two types of consumers, type 1 and type 2. There are 10,000 of type 1 and 50,000 of type 2, with the following valuations for the three products:
(a) If the manager price each product separately (i.e., using a standard pricing strategy), what prices should she charge to maximize revenues and what are the revenues?
(b) If the manager adopts a first-degree price discrimination policy, what prices should she charge to maximize revenues and what are the revenues?
(c) If the manager uses a commodity-bundle strategy such that the products are sold as one item (i.e., she markets all products together), what price should she charge to maximize revenues and what are the revenues?
consumer type cyberdesktops cyberlaptops cybercameras 1 $250 $150 $100 2 $200 $75 $250Explanation / Answer
There are 10000 consumers of Type 1 and 50000 consumers of type 2. This favours the formation of policy of price setting in favour of type 2 consumers because they are larger number.
A) when the manager is able to charge a single price, for each product its revenue are maximized when cyber desktop are priced at $200 cyber laptops are priced at $75 and cyber cameras are priced at $250. This is because if the manager price is the products according to type 1 consumers, they are number is only 10000 so the revenue will not be maximized. Revenue from cyber desktops is 60000 X 200 which is 12 million. Revenue from cyber laptops is 60000 X 75 which is 4.5 million. revenue from cyber cameras is 50000 x 250 which is 12.5 million. a total of 29 million revenue is collected.
Under first degree price discrimination each and every consumer is charged the reservation price. Total revenue from Type 1 consumers will be 250 x 10000 + 150 X 10000 + 100 x 10000 and this is equal to 5 million. Similarly revenue from type 2 consumer is 26.25 million. total revenue is 31.25 million.
The bundled prices are 250 + 150 + 100 which gives 500 from Type 1 and similarly 200 + 75 + 250 which gives 525 from type 2. Bundled price of 500 will be acceptable to both type of consumers in that case the revenue will ve 60000 x 500 which is 30 million. If the bundled price is 525, revenue is 50000 X 525 which is 26.25 million. Since revenue is maximum when bundled price is 500, it should be charged to maximize revenue.
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