Pricing problem of a department store
Assume as a manager of a profitable department store you are confronted with a pricing problem. You have two types of customers: a high-end type that are willing to pay a price of $20 for a pair of Levis Jeans, and a low-end type customer which are willing to pay a price of $13 for the same pair of jeans. Your supplier provided you with the jeans at $10 each and your extra costs are find outd at $1 per jeans. Your survey of your customers for jeans tells you that 50% of your customers are of the high end type and 50% are of the low end type. If you decided to price high, what would be your expected profits every unit.