Tyrion's company produces two versions of a software program, "premium" and "basic". There are 3 segments of customers: managers, faculty, and students, and the respective segment sizes are 2000, 1000, and 5000 respectively. The per-unit cost of producing the premium version is $20, while the per-unit cost of producing the basic version is $10. The willingness to pay for each version, by segment, is given as follows:
WTP MANAGERS = $100 PREMIUM AND $55 BASIC
WTP FACULTY = $62 PREMIUM AND $45 BASIC
WTP STUDENTS = $45 PREMIUM AND $30 BASIC
a. If Tyrion sells only 1 version, which section should he sell and what is the optimal price he should charge? What is the optimal profit of the company?
b. If Tyrion decides to sell both versions, what are the optimal prices he should charge for each version? What is the optimal profit of the company?
c. How do your answers to parts (a) and (b) change if the WTP (students) for the premium version is $48? Base your conclusion on calculations.