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Pricing and Revenue Management in a Supply Chain

Example 16-1 Pricing to Multiple Segments Right click and download the Pricing to Multiple Segments dataPreview the document to your hard drive. A contract manufacturer has identified two customer segments for its production capacity—one willing to place an order more than one week in advance and the other willing to pay a higher price as long as it can provide less than one week’s notice for production. The customers that are unwilling to commit in advance are less price sensitive and have a demand curve d1 = 5,000 – 20*p1. Customers willing to commit in advance are more price sensitive and have a demand curve of d2 = 5,000 – 40*p2. Production cost is c = $10 per unit. If total production capacity is limited to 4,000 units, what should the contract manufacturer charge each segment? What happens to prices and profitability when the sensitivity for customers that are willing to wait (i.e., segment 2) increases from 40p1 to 80p1? What did you see/learn from this exercise? Note: Use the “Solver” capability under the ”Tools” menu (but you must set sensitivity in cell C6 to desired level before you run “Solver”). Right click and download the Dynamic Pricing Data to your hard drive. What happens to the quantity purchased and profitability if the price sensitivity increases to from 1.8 p3 to 1.9 p3 in the third period? What did you learn from this exercise? *Note on using the “Solver” Add-In:The Solver Add-in is an Excel add-in program that is available when you install Microsoft Office or Excel. To use it in Excel, however, you need to load it first. Instructions for doing so were included within the module. This is something that you will have to find from your own computer. Since most students own and operate a variety of different computers with different software versions, it’s literally impossible for me to write cogent instructions for everyone. Instead, I have the generic outline for MS Office 2018 PC version. Mac maybe different and you can look at YouTube videos to get going.

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