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Anonymous

Oct 16, 2024

A manufacturer of microwaves has discovered that female shoppers have little value for microwaves and attribute almost no extra value

A microwave manufacturer has discovered that female shoppers assign little value to microwaves and perceive almost no additional benefit from an auto-defrost feature. In contrast, male shoppers generally value microwaves more highly and attribute greater significance to the auto-defrost feature. Given that incorporating an auto-defrost feature incurs minimal additional costs, the manufacturer is contemplating the introduction of two distinct models. They have determined that men value a basic microwave at $82 and one with auto-defrost at $148. Conversely, women value a basic microwave at $66 and one with auto-defrost at $82.

3 Answers

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.If the number of male and female buyers is the same, then the best pricing strategy is to offer 2 different microwaves (option 3). One simple and cheap microwave for women and one with auto-defrost for men.Strategy                     Revenue           Revenue             Total Revenue                                   from men          from women        from strategy1. Auto-Defrost             $82                      $82                   $164Microwave only at $822. Auto-Defrost           $148                     $0                     $148 Microwave  only at $1483. Simple                      $131                    $66                    $197Microwave at $66,Auto-Defrost Microwave at $131Suppose that, instead of one man and one woman, the market for this microwave consisted entirely of men. For simplicity, you can assume this means that there are two men, and no women. Under these conditions, pricing strategy 2. Auto-Defrost Microwave  only at $148 would maximize revenue for the manufacturer.

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