Question: A video game system producer has just finished developing a new gaming system, System 2, and you are tasked with determining the optimal release strategy.

A video game system producer has just finished developing a new gaming system, System 2, and you are tasked with determining the optimal release strategy. In particular, should it offer only one version, and if so which one: the current System 1 or the new System 2. Alternatively, should it offer both systems simultaneously?

The firm’s market research team produced the following numbers regarding willingness to pay for the two systems:

		WTP for:
USER TYPE	# USERS	SYSTEM 1	SYSTEM 2
Low-end user	8 million	300	600
High-end user	2 million	800	1200

The estimated production cost of System 1 is $200, and for System 2 is $400.

Determine the firm’s optimal course of action and pricing strategy.

Step by Step Solution

★★★★★

3.30 Rating (153 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

If only system 1 is offered If it is priced at 300 then all users 8 2 10 million would opt for it an... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Corporate Finance Questions!

The following table shows five bidders willingness to pay for a piece of art that is being auctioned by an auction house. BidderWillingness to pay John ..$10,000 James ..$20,000 Tim ..$30,000 Ryan...

You are tasked with organizing volunteers who have shown up to help after a tornado has destroyed a community. How would you organize the volunteers?

You are tasked with building VBA code to solve some sort of Excel problem that plagues you. This can be an academic problem or a work-related problem. On some level, it should be related to...

Zing Lager has just purchased the Chicago Brewery. The brewery is 2 years old and uses absorption costing. It will sell its product to Zing Lager at $44 per barrel. Peter Bryant, Zing Lagers...

The motion picture industry has undergone significant changes since the 1960s. Originally, companies such as Paramount Pictures had to rely solely on domestic and foreign screenings of their movies...

Youre a seasoned financial executive whos recently been hired as the CFO of the Pilaster Corporation. The firm has just finished two years in which its financial performance has been clearly below...

Seating Unlimited, Inc is considering producing a specialty lawn chair for the next Olympics, which will occur in two years. The new production line will require a $100,000 investment in fixed...

Gerken Fabrication Inc. uses the job order cost system of accounting. The following information was taken from the companys books after all posting had been completed at the end of March: a. Compute...

A company that produces and markets video game systems wishes to assess its customers level of satisfaction with a relatively new model, the XYZ Box. In the six months since the introduction of the...

Researcher Zoran Popovic' has developed a video game called Mozak (Serbo-Croatian for brain) for the Allen Institute for Brain Science that enlists players research participants, actuallyto trace...

Understanding real world annual reports Required Use the Target Corporations annual report in Appendix B to answer the following questions. a. What was Targets inventory turnover ratio and average...

Pierce Furnishings generated $2.0 million in sales during 2004, and its year-end total assets were $1.5 million. Also, at year-end 2004, current liabilities were $500,000, consisting of $200,000 of...

Rewrite the following in a strong, simple, and concise way "At the start of the new project, I was entrusted by my management team to develop a comprehensive training program specifically designed...

Martinho is a citizen of Brazil and lives there year-round. He has invested in a plot of Illinois farmland with a tax basis to him of $1 million. Martinho has no other business or investment...

Use Rices theorem, which appears in Problem 5.28, to prove the undecidability of each of the following languages. Aa. INFINITE TM = {M| M is a TM and L(M) is an infinite language}. b. {M| M is a TM...

A sample survey reports that 29% of Internet users download music files online, 21% share music files from their computers, and 12% both download and share music. a. Make a two-way table that...

Explore project management software on vendors websites. Select a single project management package, download the demo, and try it. Make a list of the important features of the package. Be sure to...

What is capital rationing? Distinguish between hard and soft capital rationing.

if your patient has a backup ventilator, it needs: a. to have both batteries checked every shift b. to be pluged in c. to be used if there is failure of the bedside ventilator d. all of the above

1 Become Familiar with case substance: What are the facts? What is happening? Is all the relevant information available to you? 2 Determine Central Issues: What decisions need to be made? Who is...

How would you show that if the supply of a product is perfectly price inelastic, the burden (incidence) of a specific tax imposed on each unit produced (sold) will be borne entirely by the producers...

What is the price elasticity of supply in this situation? You run a fish boat in Burgeo, Newfoundland. You have caught a certain amount of fish which you must sell within a certain time because you...

How would you show that if the demand for a product is perfectly price inelastic, the burden (incidence) of a specific tax imposed on each unit produced (sold) will be shifted fully on to consumers?...

Why may a fall in the supply of farm products lead to larger incomes for farmers? 0 Time u the longer the time it takes for a producer to respond to a change in price, the less elastic a product will...

What information does this elasticity coefficient give? When average income increases from $5000 to $8000, the quantity of automobiles demanded increases from 100 000 to 120 000. Price per Quantity...