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A manufacturer of microwaves has discovered that male shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Female shoppers generally value microwaves more than men and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an autodefrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $70 and one with auto-defrost at $80 while women value a simple microwave at $80 and one with autodefrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue? What if women compromise the bulk of microwave shoppers?

There are three possibilities. First, we can market a single microwave (with auto-defrost) to both men and women at $80. Second, we can market a single microwave (with auto-defrost) only to women at $150. Third, we can version by selling a simple microwave targeted to men for $70 and an auto-defrost version targeted to women for $140 ($70 + $150 - $80). The existence of a simple microwave constrains our pricing on the auto-defrost one. Women value the auto-defrost feature at $70 ($150-$80), and therefore its price cannot exceed that of the simple one by more than $70.

If there is an equal number of men and women (say 1 of each), the revenue from each of our three strategies, respectively, is $80x2=$160, $150x1=$150, and $70x1+$140x1=$210. Therefore, offering the two versions is best.
On the other hand, if almost all shoppers are women, the best strategy will be to sell only microwaves with auto-defrost feature at $150.