Assessment:

Topic: More Realistic and Complex Pricing

LMS Dropbox: Pricing
Filename: Pricing <your name>

1. Suppose your elasticity of demand for your parking lot spaces is -2 and prices is 160 per day. If
your MC is zero and your lot is 80% full at 9 a.m. over the last month, are you optimizing?
80% capacity is not optimized. With elasticity of |2|, which is greater than 1, demand is elastic.
The price should be lowered in order to increase demand and increase the % capacity.
2. Some high-end retailers place their most expensive products right in the entryway of the
store, where consumers will see them first, and place their more popular, better-selling items
further back. Why?
The store is using a higher-priced options to drive up expectations and make later lowered
priced options appear less expensive in comparison.
3. When the Macintosh computer was introduced in 1982, Apple made it difficult for third-party
software developers to develop software for the platform. In contrast, Apple makes it
relatively easy for third-party developers to make applications that run on the iPhone.
Compare and contrast these two strategies. Use Venn Diagram.
PS MAAM I CANNOT CREATE A VENN DIAGRAM WITH MY PHONE, PLEASE DO CONSIDER.
When Apple made it difficult for third-party developers, it produced both hardware and
software and profited both from the sale of the computers and from the sale of software for
those computers. Since the hardware and software are complements, Apple priced each below
its stand-alone profit-maximizing price. With the iPhone, Apple encouraged third party
developers. As the software apps produced by these developers are complements to the
iPhone, they make the iPhone more valuable, allowing Apple to raise its price. The relative value
of the two strategies depends on how complementary software is to the hardware and the
relative ability of third-party developers relative to Apple .