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 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 $61 and one with auto-defrost at $77, while women value a simple microwave at $77 and one with auto-defrost at $138 Suppose the manufacturer is considering three pricing strategies: 1. Market a single microwave, with auto-defrost, at $77, to both men and women. 2. Market a single microwave, with auto-defrost, at $138, to only women. 3. Market a simple microwave to men, at $61. Market a microwave, with auto-defrost, to women at $121 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. Revenue from Total Revenue from Revenue from Strategy Strategy Men Women 1, Auto-Defrost Microwave only at $77 $ $ $ $ 2. Auto-Defrost Microwave only at $138 $ $ $ 3. Simple Microwave at $61, Auto-Defrost Microwave at $121

Answer 1

Strategy	Revenue from Men($)	Revenue from Women($)	Total Revenue($)
Auto-Defrost Microwave only at $77	77	77	154
Auto-Defrost Microwave only at $138	0	138	138
Simple Microwave at $61, Auto-Defrost Microwave at $121	61	121	182

Strategy	Toral Revenue when market has only women($)
Auto-Defrost Microwave only at $77	2 x 77 = 154
Auto-Defrost Microwave only at $138	2 x 138 = 276
Simple Microwave at $61, Auto-Defrost Microwave at $121	2 x 121 = 242

Selling AutoDefrost at $138 will maximize revenue for manufacturer when catering to only women market