A compact car manufacturer has conducted a market test and found that the willingness-to-pay distribution of its customers is a Uniform (0, $25000). The total market size for the car they manufacture is 2,500,000.  The car manufacturer can manufacture cars for an incremental cost of $15,000 apiece.

Find the price-response function corresponding to the willingness-to-pay distribution of the customers of the car manufacturer.  Verify that the willingness-to-pay distribution corresponding to the price-response function you just found is a Uniform (0, $25000).
 

Find the contribution maximizing price, the total contribution, the demand, and the price elasticity at the contribution maximizing price.
 

With the market segmented at $18,000 find the prices the maximize contribution.
 

With the market segmented as in Part b, if the cannibalization rate is 5 percent, what prices should the car manufacturer offer to maximize contribution?
 

Find the optimum segmentation level without cannibalization.
 

Find the optimum segmentation level with a cannibalization rate of 5 percent.
 

If the manufacturing capacity is constrained to 350,000 cars, what is the price the maximizes contribution.
 

If the market is segmented at the price of $18,000, and capacity is still constrained at 350,000 cars, what prices should the manufacturer change to maximize contribution?

Answer rating: 100% (QA)

Priceresponse function The priceresponse function is a function that maps prices to demand In this case the priceresponse function is a uniform distri... View the full answer