Should cash customer be charged the same price as credit card customers when credit card customer...
Should cash customer be charged the same price as credit card customers when credit card customer cost the retailer more?
Homework Answers
Personally speaking, cash customers should not be charged the same price as credit card customers when credit card transactions cost more for the retailers.
There is a financial reason behind the additional cost involved in credit card transactions. The business incur additional expenses in processing their credit card transactions because the credit card processing companies charge a fee on each transaction the business make through the credit cards. Additionally, business needs to invest in software and hardware devices to facilitate credit card transactions. All of these factors are not involved in cash transactions thus making it easy for the retailers in terms of financial returns.
Thus, cash customers who make financial transactions easy and effective for the retailers should be charged lesser than the credit card customers. A classic example is the gas stations where the cash customers are offered lesser price when compared to credit card customers. This strategy encourages more cash transactions than the credit card transactions.
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Should cash customer be charged the same price as credit card
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Question 3: Evaluating customer profitability You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B credit card balance $500 $200 number of transactions 50 20 number of customer-support calls 20 1 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 30%. Thus, if the credit card balance is $1,000, revenue is $1000*0.3=$300. Variable costs...
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You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B $600 credit card balance $1,500 number of transactions 150 60 number of customer-support calls 60 3 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 10 %. Thus, if the credit card balance is $1,000, revenue is $1000*0.1-$100 Variable costs are zero for simplicity....
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expected loss from a potential default
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Suppose you analyzed the average monthly credit card bill of Visa credit card customers using two randomly selected samples: one with 144 Visa credit card customers (Sample #1) and one with 100 Visa credit card customers (Sample #2). Every credit card customer in Sample #1 had a monthly credit card bill of $1,812. Sample #2, on the other hand, had an average monthly credit card bill of $1,868 with a variance of 1,302,388 ($)^2. If you combined these samples into...
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Suppose you analyzed the average monthly credit card bill of Visa credit card customers using two randomly selected samples: one with 144 Visa credit card customers (Sample #1) and one with 100 Visa credit card customers (Sample #2). Every credit card customer in Sample #1 had a monthly credit card bill of $1,812. Sample #2, on the other hand, had an average monthly credit card bill of $1,868 with a variance of 1,302,388 ($)^2. If you combined these samples into...
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Customers at a gas station pay with a credit card (A), debit card (8), or cash (C). Assume that successive customers make independent choices with P(A) = 0.4, P(B) 0.2, and P(C) = 0.4. (a) Among the next 100 customers, what are the mean and variance of the number who pay with a debit card? customers customers Explain your reasoning. O Because we are interested in whether or not a debit card was used, we can use the binomial distribution....
Of all the customers at a gas station, 40% pay by credit card, and the rest use cash. (a) Find the probability that out of 5 random customers, at most 1 uses credit card. 0.375 5 x 0.4 x 0.64 0.69 + 5 x 0.4 x 0.64 0.05184 (b) Knowing that at most 1 out of the 5 customers paid using credit card, what is the conditional probability that all 5 customers used cash payment? Answer: Suppose that the customers...
Question 3: Evaluating customer profitability You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B credit card balance $1,500 $600 number of transactions 150 60 number of customer-support calls 60 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 40%. Thus, if the credit card balance is $1,000, revenue is $1000*0.4=$400. Variable costs are...
You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B $600 credit card balance $1,500 number of transactions 150 60 number of customer-support calls 60 3 The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 10 %. Thus, if the credit card balance is $1,000, revenue is $1000*0.1-$100 Variable costs are zero for simplicity....
When issuing a new credit card to a potential customer what sunk
costs would be ignored for the purposes of the credit decision?
expected loss from a potential default
cost of servicing the card
interest rate that could be earned elsewhere
cost of advertising or mailer sent to acquire a new customer
Suppose you analyzed the average monthly credit card bill of Visa credit card customers using two randomly selected samples: one with 144 Visa credit card customers (Sample #1) and one with 100 Visa credit card customers (Sample #2). Every credit card customer in Sample #1 had a monthly credit card bill of $1,812. Sample #2, on the other hand, had an average monthly credit card bill of $1,868 with a variance of 1,302,388 ($)^2. If you combined these samples into...
Suppose you analyzed the average monthly credit card bill of Visa credit card customers using two randomly selected samples: one with 144 Visa credit card customers (Sample #1) and one with 100 Visa credit card customers (Sample #2). Every credit card customer in Sample #1 had a monthly credit card bill of $1,812. Sample #2, on the other hand, had an average monthly credit card bill of $1,868 with a variance of 1,302,388 ($)^2. If you combined these samples into...
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