Question

Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its dolls: low-value consumers and high-value consumers. Each of the low-value consumers tends to purchase one doll and one accessory, with a total willingness to pay of $72. Each of the high-value consumers buys one doll and two accessories and is willing to pay $138 in total.
Mattel is currently considering two pricing strategies:
• Strategy 1: Sell each doll for $36 and each accessory for $36
• Strategy 2: Sell each doll for $6 and each accessory for $66
In the following table, indicate the revenue for a low-value and a high-value customer under strategy 1 and strategy 2. Then, assuming each strategy is applied to one low-value and one high-value customer, indicate the total revenue for each strategy.
Revenue from Low-Value Customers
Revenue from High-Value Customers
Total Revenue from Strategy
$72 Value, 1 Accessory
$138 Value, 2 Accessories
($)
($)
($)
Strategy 1
$36 doll + $36 accessory
Strategy 2
$6 doll + $66 accessory
The strategy that generates the most revenue is strategy .(1 or 2)

Answer 1

Answer:

Mattel

a) Revenue outcomes from strategies:

                                      Strategy 1           Strategy 2                      

Doll:

Low-Value Customers       36                         6

High-Value Customers      36                         6

Accessory :

Low-Value Customers       36                       66

High-Value Customers      72                      132

Total Revenue                $180                   $210

b) The strategy that generates the most revenue is strategy 2.

Explanation:

a) Data and Calculations:

Types of Consumers:

Revenue from Low-value Customers = $72

Revenue from High-value Customers = $138

Strategy 1: Doll for $36 and each accessory for $36

Strategy 2: Doll for $6 and each accessory for $66

The high-value customers buy 2 accessories with 1 doll.

The low-value customers buy 1 accessory with 1 doll.

b) Revenue outcomes from strategies:

                                     Strategy 1           Strategy 2                      

Doll:

Low-Value Customers     36                         6

High-Value Customers    36                         6

Accessory :

Low-Value Customers     36                       66

High-Value Customers    72                      132

Total Revenue              $180                   $210