Pricing Solution Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

PHASE-II

1. Make a price recommendation based on these estimates. Please explain any concerns or caveats you might have with your recommendation.

“Own” price elasticity of demand; it is a terminology that is used to measure or quantify the impact on the change in quantity demanded due to the fact that the price of the product has some change between the quantity of the product and the price of the product, the demand function that is the demand of the product has an inverse relationship. In addition, the coefficient will always be negative.

Own price elasticity = % Change in quantity demanded / %Change in price

The total amount of variations measured in a sample of data are referred as the standard error, or when an estimate is to made from a specific sample of data then any variations identified in the data, which may lead to disruption in the final result is known as standard error.

The survey conducted by the third part to evaluate the results of the sales conducted during the first few months of the operations showed a result of own-price elasticity of demand of -0.75 with a standard error of 1.2, this indicates that a 13.3% change in price will lead to an 10% change in quantity, which is an inversely proportional effect on the demand on the product that is an own-price elasticity of demand of 0.75 but this survey has an standard error of 1.2, which means there are variations in the results meaning the value of -0.75 is not 100% correct. Now when a price for the contract is to be set the consideration has to be made that change in price will lead to change in quantity means leading to change in demand. Since, the scenario does not contain any such information regarding quantity and demand an appropriate price cannot be calculated.

PHASE-III:

Demand Analysis

1. Consider the current subscription plan offered by the firm and assume it is the only service offered: basic service on the LG Device with content from NBC, CBS, and ESPN. Plot the EVC demand curve for this subscription plan. Be sure to label your graph clearly.

2. Now suppose the firm also offers an alternative plan consisting of basic phone service on the LG device with content from NBC, CBS, ABC, ESPN and STARZ for $50 per month. Plot the new EVC demand curve for the plan offered in 1 (a).

Considering the basic service on the LG Device with content from NBC, CBS, and ESPN then the EVC demand curve for this subscription plan will be as follows;

Considering the basic service on the LG Device with content from NBC, CBS, ABC, STARZ and ESPN then the EVC demand curve for this subscription plan will be as follows;

Pricing Analysis:

1. Suppose the firm only offers the plan in 1(a). What is the revenue-maximizing, monopoly price of the subscription for a month of service?

2. Suppose the firm would be willing to unbundle the basic phone service and content instead of offering the plan in (2). Under this new plan, the firm sells the LG device with basic phone service as one option, but, consumers could choose to add the content bundle to the basic service. The content bundle consists of content from NBC, CBS, and ESPN. An additional price would be charged for the content bundle. Naturally, a consumer would have to purchase the basic phone service in order to get access to the additional optional television content.

To estimate the revenue maximizing monopoly price of the subscription for a month of services, the company needs to evaluate each segment on the bases of their need, desires and willingness to pay because if the company sets the price of the product, which does not complement these three factors then there is a high chance that the product will fail. Therefore, a price discrimination policy will need to be adopted for all three segments.

For the segment 1 there is a willingness to pay of 14%, which shows that there is no great need or desire of such a product and only selective people who choose or prefer this product, therefore the price to be set for this segment should not overpower that particular group of people, which will lead to failure of the product.....................................

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