Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its dolls: low-value consumers and high-value consumers. Each of the low-value consumers tends to purchase one doll and one accessory, with a total willingness to pay of $80. Each of the high-value consumers buys one doll and two accessories and is willing to pay $157 in total.
Mattel is currently considering two pricing strategies:
- Strategy 1: Sell each doll for $40 and each accessory for $40
- Strategy 2: Sell each doll for $3 and each accessory for $77
In the following table, indicate the revenue for a low-value and a high-value customer under strategy 1 and strategy 2. Then, assuming each strategy is applied to one low-value and one high-value customer, indicate the total revenue for each strategy.
Revenue from Low-Value CustomersRevenue from High-Value CustomersTotal Revenue from Strategy$80 Value, 1 Accessory$157 Value, 2 Accessories ($) ($) ($) Strategy 1$40 doll + $40 accessory Strategy 2$3 doll + $77 accessory
The strategy that generates the most revenue is strategy