Chapter 80. Pricing Products by Using Tie-Ins

Question answered in this chapter:

  • How does the fact that customers buy razor blades as well as razors affect the profit-maximizing price of razors?

Certain consumer product purchases frequently result in the purchase of related products, or tie-ins. Here are some examples:

Original purchase

Tie-in product

Razor

Razor blades

Men’s suit

Shirt and/or tie

Personal computer

Software training manual

Video game console

Video game

Using the techniques I described in Chapter 79, it’s easy to determine a demand curve for the product that’s originally purchased. You can then use the Microsoft Excel Solver to determine the original product price that maximizes the sum of the profit earned from the original and the tie-in ...

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