Question

Maytas Pharmaceutical Company has recently developed a new, fast acting cold/flu medicine, which includes two variants: one is for use at night and another for daytime use. The firm’s target market consisted of 1000 consumers belonging to one of four segments, A, B, C, and D. The segment sizes and each segment’s willingness to pay for a box of cold/flu medicine appear in the table below.

	Willingness to pay
	Day Medicine	Night Medicine
Segment A (25%)	$1.00	$9.00
Segment B (25%)	$4.00	$8.00
Segment C (25%)	$8.00	$4.00
Segment D (25%)	$9.00	$1.00

The variable cost of manufacturing a box of day medicine is $2.00, night medicine is $3.00, and $5.00 for the bundle. Evaluate the various pricing alternatives (selling separately, pure bundle, mixed bundle) and recommend a corresponding price discrimination strategy for Maytas. Please show your work.

Answer 1