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    Economics: Pricing decisions.

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    Using anticipated sales data, recommend pricing of new tiers

    In response to increased requests for a la carte pricing, a firm has decided to start a trial
    offering of smaller program tiers. As the first step of the trial, two small program packages will
    be offered to those using our basic package. The first is a sports package which includes
    NBA TV and the Soccer Channel. The second is a music package that includes MTV2 and
    GAC.

    The trial offering will be limited to our Region 1 and Region 2 markets only. We estimate that
    our relevant incremental costs for the sports package are $1.45 per subscriber and the
    incremental costs for the music package are $1.20 per subscriber.

    The attached preliminary survey conducted by our marketing team indicates
    anticipated sales at various pricing points. What are your recommendations
    regarding the pricing of these new program tiers.

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    https://brainmass.com/economics/pricing-output-decisions/economics-pricing-decisions-626987

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    QUESTION

    In response to increased requests for a la carte pricing, a firm has decided to start a trial offering of smaller program tiers. As the first step of the trial, two small program packages will be offered to those using our basic package. The first is a sports package which includes NBA TV and the Soccer Channel. The second is a music package that includes MTV2 and GAC.

    The trial offering will be limited to our Region 1 and Region 2 markets only. We estimate that our relevant incremental costs for the sports package are $1.45 per subscriber and the incremental costs for the music package are $1.20 per subscriber.

    The attached preliminary survey conducted by our marketing team ...

    Solution Summary

    The problem set deals with determining the maximum net income from two different markets.

    $2.19