Cоffee Stаines is аn оnline оnly coffee compаny. There are currently using a single-price pricing strategy, charging $18 for a one pound bag of their standard coffee beans. Based on their weekly sales data, they believe that there is an opportunity to increase profit for this product by implementing a new pricing strategy. In the past, they have used a membership-pricing strategy and a block-pricing strategy, but at this time they are not interested in returning to either one of these strategies. Their data analytics team has determined they have two types of buyers: (1) One-time buyer who is a new buyer who only makes one purchase per year and (2) Repeat buyer who is an existing buyer who makes multiple purchases per year. Using weekly sales data, the following weekly demand functions were estimated for a one pound bag of coffee beans. Marginal cost is constant at $4 per one-pound bag of beans. QO = 5,000 – 200PO – Demand for one-time buyers QR = 4,000 – 100PR – Demand for repeat buyers Coffee Staines is interested in reviewing the profit maximizing prices to charge to each group and the associated profits. They are curious to see if they can increase profits by charging different prices to each group rather the same price to both groups. Please answer the following questions: Single price strategy of $18: How many pounds of coffee beans will be sold to one time buyers and what is the assoicated profit? How many pounds of coffee beans will be sold to repeat buyers and what is the assoicated profit? What is total profit for when using the single-price pricing strategy? Alternative pricing strategy: What is the profit maximizing price to charge for one time buyers and what is the assoicated profit? What is the profit maximizing price to charge for repeat buyers and what is the assoicated profit? Do you think it is a good idea for Coffee Staines to move away from a single-price pricing strategy and implement a new pricing Strategy? Why or why not?
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