Video captioning technology for education is evolving rapidly. There are multiple options for

implementing captions in your online meetings. Two popular tools used for video annotation are

EVT and Otter.

Zoom has been approached by a UCSD start$-$up called EVT.ai$,$ which provides Zoom with

EVT $($EventVideoTagging$).$ EVT.ai does not only provide voice captioning but a whole solution,

including AI$-$driven automatic video chaptering, table of contents, and learning tools. Imagine that

Zoom decides to implement EVT.ai solution into its business version product as a paid add$-$on$.$

Market research reveals that the market can be approximately segmented into two segments.

In one segment of the market, there are about $2$ million potential users who are willing to pay $$8$

for the EVT solution. The other segment has about $3$ million potential users who are willing to

pay $$5.$

Assume that there is a fixed license fee that Zoom has to pay EVT.ai$,$ but there is no extra charge

if Zoom sells any copy to the customers. In this fixed cost scenario, we do not need to consider

how sales $($how many customers purchase the EVT features$)$ affect the price and value capturing.

$($a$)$Analyze the scenarios that pricing other than $5$ and $8.$ Prove that these prices will never be

optimal than $5$ or $8.(2$ points$)$

$4$

Prof. Vish Krishnan

$($b$)$What will be the profit if we charge at $5?(1$ point$)$

$($c$)$What will be the profit if we charge at $8?(1$ point$)$

$($d$)$What is the optimal strategy in this situation? $(2$ points$)$

Now, suppose that the license fee Zoom agrees to pay EVT.ai is based on the volume of the software

copies sold. Zoom has to pay $$2$ per copy sold. This is the variable cost scenario. Now, what

is the optimal strategy for Zoom to price the EVT add$-$on solution? $($Hint: optimal strategy here

means setting the price to maximize the profits$)$

$($e$)$What will be the profit if we charge at $5?(1$ point$)$

$($f$)$What will be the profit if we charge at $8?(1$ point$)$

$($g$)$What is the optimal strategy in this situation? $(2$ points$)$