Price Point Research

How should an updated product be priced?

A manufacturer was considering introducing an improved version of its product, and wished to gauge reaction to several price points.

Product users responding to a telephone interview were offered a range of prices and were questioned about the percent of cases on which they would use the product as the price went up or down.

The seven data points obtained are plotted below, along with a computed regression line. Remarkably, the line almost exactly fits the data and it illustrates what every college economics student learns about the influence of price on demand.

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