Question

The latest Xbox sells for $849 to competitive gamers, who would pay only $600 if they have to wait a year. Regular gamers would pay $500, regardless the time of purchase. If the MC of the Xbox is $249, and there are equal number of each customer type, please disregard the time value of money and compute the optimal sale scheme for the latest Xbox.

Answer 1

Having said the latest price $849, let's consider there are 100 of each type of customers are ready to purchase the product.

The gross revenue regardless of bounce rate of the customer $849x200=$169,800

As mentioned about the cap of buying price, the possibility of bounce rate is pretty high at such price. To consider about revenue at such stage, considerable customer to buy the product at ($600x100)+($500x100)=$110,000, regardless of the time value of money.

It's worth noting that your company may not actually be able to sell the necessary quantity at that price level. The business must now decide what actual price to charge given various factors, including market competition, seasonality, and the fact that higher prices can sometimes dampen sales. Additionally, if the price is too high for the current market, it's worth also examining COGS (Cost of Goods Sold) for opportunities to reduce the costs to produce the product.

Considering such a scenario, the latest price can be capped around $560 to $580 to avoid the bounce rate of the gamers and maintain an approximate 150% of profit margin over MC.