Supply Chain Management LGMT 683

All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical University, DaytonaBeach, Florida, 32114. No part of this material may…

All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical University, DaytonaBeach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval system or transmitted in any form,electronic, mechanical, photocopying, recording or otherwise without the prior written consent of the University.College of Business | worldwide.erau.eduSupply Chain Management LGMT 683Problem Set 4eBike, an electronic bicycle manufacturer, has identified two customer segments, one is willingto pay a higher price for a customized bicycle and the other one is more price sensitive and iswilling to pay for standard bicycles. Demand curve for the customers willing to pay forcustomized bicycles is d1 = 11,000 – 25p1. Demand curve for the more price sensitive customersis d2 = 11,000 – 45p2. Assume production cost for each bicycle (standard and customized) is c =$160 per unit.1. What price should eBike charge each segment if its goal is to maximize profits?2. If eBike was to charge a single price over both segments, what should it be? How muchincrease in profits does differential pricing provide?3. If total production capacity is limited to 5,000 units, what should eBike charge eachsegment?

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