A manufacturer of microwaves has discovered that male shoppers have little value

Question

A manufacturer of microwaves has discovered that male shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Female shoppers generally value microwaves more than men and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an autodefrost 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 $70 and one with auto-defrost at $80 while women value a simple microwave at $80 and one with autodefrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue? What if women comprise the bulk of microwave shoppers?

Explanation / Answer

Since, men value the microwave at $70, the company can sell the simple microwave at 70$ and the one with autodefrost at $140. By this technique the men can purchase the simple model at their values price of $70 and women can purchase the autodefrost model at $140 with a surplus of $10.

Also, if bulk of shoppers are women then the company should not reduce the price and sell the entire autodefrost range at $150 since the women value it at that price.

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