6. Even through pork bellies trade in a perfectly competitive market, Oscar Meyer bacon enjoys strong...
6. Even through pork bellies trade in a perfectly competitive market, Oscar Meyer bacon enjoys strong brand loyalty that enables the company to employ pricing strategies for the product. The company is looking for a new brand manager for the bacon division, so they ask applicants to come up with a suggested pricing strategy as a way to evaluate their skills. Evaluate each idea below and recommend the one with the best chance of succeeding given the following market information. o o The combined estimated demand curve for bacon (both rural and urban) is Qd = 6515 - 715P (inverse demand is P = 9 - .0014Qd) This equation is a little off because it has to be linear The estimated demand curve for bacon in rural areas is Qd=1515 - 252.5P (inverse demand is P= 6 -.00396Qd) The estimated demand curve for bacon in urban areas is Qd = 5000 - 500P (inverse demand is P=10 - 002Qd) o o O The marginal cost of producing bacon is $4 (note: MC is constant, so MC=ATC=4.) Based on a reliable survey of over 10,000 shoppers: the average price men are willing to pay for hot dogs is $3 while the average price women are willing to pay for hot dogs is $2.50 survey the average price men are willing to pay for bacon is $7 while the average price women are willing to pay for bacon is $6. Pricing Strategy ideas presented: 1. Profit maximize using one price. 2. Bundling bacon and hot dogs for $9 3. Segmenting by Urban/Rural locations instead of charging one price for both areas. (You need to Identify the best prices to evaluate this option.)