Question for Competitve Analysis

4. Playstation 5. (12 points) As you may have heard, Sony is launching PlayStation 5. It has been developed in the last few years and Sony has debating when to launch it. We still don't know if PS4 will continue to be sold after the release of PS5. Sony's market research team produced the following numbers regarding willingness to pay for PS4 and PS5: Willingness to pay for ($) PS 4 PS 5 # users Low-end 700 1000 70 million High-End 1100 2100 30 million The estimated production cost of a PS5 is $400, while that of a PS4 is $200. (a) If Sony sells only one version, what is its optimal price? Which one they should sell? (4 points) (b) If Sony decides to sell both versions, how much should they charge each of them? Is Sony better off by selling both versions simultane- ously or only one? (4 points) (c) If the actual number of high-end user is 10 millions, would your answer regarding Sony's optimal choice in (b) change? Explain carefully. (4 points)