A video store believes there are two equally sized consumer groups with differen

Question

A video store believes there are two equally sized consumer groups with different values for two DVDs as follows:

segment 1 values DVD A at $10 and DVD B at $8

Segment 2 vales DVD A at $4 and DVD B at $12

There are estimated to be 50 consumers in each group. The store currently has 100 of each DVD on hand. It paid $10 for each DVD. If it is unable to sell them all it can return them to the distributor for $4 each. To maximize profit contribution from the sale (or return) of these DVDs the store should:

A. Set a standard price of $8 for each DVD

B Set a price of $10 for A and $12 for B

C Offer A and B together for a price of $16

D Offer A and B together for a price of $18

E None of the above

Explanation / Answer

Correct Answer is C: Offer A and B together for a price of $16

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