Cambridge Software Case

ECO 241 HW: Jianfeng Yao (28168720) Ludan Wang (27710517) Yuheng Shi (27722596)

Cambridge Software Corporation Case

To answer the question that whether the company should offer one version of Modeler or more, we have calculated the contribution of offering only one version:

Offering only Student version (Optimally):

Segments | Price | Unit Cost | Unit Contribution | Seg.Dev | Demand | Contribution |

Student | $50 | $15 | $35 | $300,000 | 500,000 | $10,320,000($17,200,000 *60%) |

Small Business | $150 | $15 | $135 | $200,000 | 15,000 | $1,825,000 |

Consultant & professional companies | $150 | $15 | $135 | $200,000 | 20,000 | $2,500,000 |

Large, multidivisional corporations | $150 | $15 | $135 | $150,000 | 5,000 | $525,000 |

Total | N/A | N/A | N/A | $950,000 | 520,000 | $12,920,000 |

*Since we can only distinguish the identity of student (By student ID) from other consumers and we provide only one version of the modeler, pricing higher than 100 would lose the consumer from Corporate R&D and university laboratories (They have negative CS at this price). Nevertheless, we price at $150 since the potential demand is only 2000 in Corporate R&D and university laboratories.

Offering only Commercial version (Optimally):

Segments | Price | Unit Cost | Unit Contribution | Seg.Dev | Demand | Contribution |

Student | $60 | $25 | $35 | $300,000 | 500,000 | $10,5000,000 |

Corporate R&D and university laboratories | $1000 | $25 | $975 | $100,000 | 2,000 | $1,950,000 |

Large, multidivisional corporations | $1000 | $25 | $975 | $150,000 | 5,000 | $4,875,000 |

Total | N/A | N/A | N/A | $450,000 | 507,000 | $11,825,000 |

*Again, if we price at $300(or lower) in order to capture the consumers from small business and Consultants and professional companies rather than price at $1000, we will lose more than we can actually gain. Accordingly, we decide price at $60 for students and $1,000 for others.

Offering only...