Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 24

You are a pricing analyst for QuantCrunch Corporation, a company that recently spent $15,000 to develop a statistical software package. To date, you only have one client. A recent internal study revealed that this client's demand for your software is Q d = 300 - 0.2 P and that it would cost you $1,000 per unit to install and maintain software at this client's site. The CEO of your company recently asked you to construct a report that compares (1) the profit that results from charging this client a single per-unit price with (2) the profit that results from charging $1,450 for the first 10 units and $1,225 for each additional unit of software purchased. Construct this report, including in it a recommendation that would result in even higher profits.