Suppose that JVC is trying to decide how to price a new stereo system composed of a receiver, CD player, and speakers. The company's economists have estimated that two different groups will purchase these products: students and club owners. The economists analysis suggests that the total market for its brand of stereos consists of 10,000 students and 50,000 club owners. In addition, it is estimated that the maximum amount each group will pay for each stereo component is as follows:

Group Receiver CD Player Speakers

Students $250 $150 $100

Club owners $200 $75 $250

Required:

a) Suppose that JVC markets the receiver, CD player, and speakers are sold separately and together. What prices should JVC charge to maximize revenues?

The answer is "Receivers = 200, CD player = 75, Speaker = 250, and Combined (bundling) = 500".

Explanation:

As a Receiver

If the value of P = 250, purchase only by students then,

TR = 250 * 10,000 = 2,500,000

If the value of P = 200, buy by both forms

TR = 200 * (60,000) = 12,000,000

And higher TR,

P = 200,

For the receivers fee of P = 200

Player CD

Where the value of P = 150

TR = 150 * 10,000 = 1,500,000

If P = 75,

TR = 75 * (60,000)

Superior TR with P = 75,

Rapporteurs,

If P = 100, buy both

TR = 6,000,000

TR = 100 * (60,000)

If P = 250, then buy only the club owner

TR = 250 * 50,000

TR = 12,500,000

So taller TR with P = 250

Then the will to pay combined

250 + 150 + 100 = 500 For students

For club members, 200 + 75 + 250 = 525

So if P = 500, you buy both forms

TR = 500 * 60,000 people

= 30,000,000

If only club owners buy P = 525, then

TR = 525 * 50,000

TR = 2,650,000

The higher TR for P is 500.