An experiment on pricing and social responsibility was conducted using a popular ride at a large amusement park, where digital photos are taken of the riders and offered for sale at the end of the ride. The experiment was designed to determine the effect of pricing strategy under four conditions: the normal pricing strategy used by the ride; the effect when customers are allowed to pay whatever they want; the effect when customers are told that half the revenue is donated to charity; and the effect when customers can pay what they want and half the money is donated to charity. The experimenter had the amusement park try all four pricing strategies, and the proportion of riders buying the photos and the mean price paid are given for each of the pricing scenarios in Table A.3. The ride has 15,000 customers per day, and photos normally cost $12.95. Compute the daily total revenue for the company under each of the scenarios. (The total number of customers buying the photo is the proportion buying times the 15,000 customers. The total revenue is the number buying photos times the mean price paid. Also don€™t forget to donate half the money to charity when required!) What pricing strategy should the managers of the business use if they are only concerned about maximizing revenue? What pricing strategy should they use if they want high revenue combined with social responsibility?  

Table A.3

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Proportion Buying Mean Amount Pricing Strategy |(a) Standard |(b) Pay what you want (c) Half to charity |(d) Both (b) and (c) Paid $12.95 $ 0.92 $12.95 $ 5.50 0.005 0.08 0.006 0.04