A department store has 700 pairs of purple Capri stretch pants that it must sell in the next four weeks. The store manager knows that demand by week for the next four weeks will be linear each week, with the following price?response functions:
Week 1: d1(p1) = 1,000 ? 100p1
Week 2: d2(p2) = 800 ? 100p2
Week 3: d3(p3) = 700 ? 100p3
Week 4: d4(p4) = 600 ? 100p4
Assume that the demands in the different weeks are independent, that is, that customers who do not buy in a given week do not come back in subsequent weeks.
a. What is the optimum price the retailer should charge per pair if she can only set one price for all four weeks? What is her corresponding revenue?
b. Assume she can charge a different price each week. What are the optimum prices by week she should charge? What is her corresponding revenue?
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A department store has 700 pairs of purple Capri stretch pants that it must sell in the next four we...
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