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Microsoft® Excel Data Analysis and Business Modeling by Wayne L. Winston

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Chapter 69. Pricing Products with Tie-Ins

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

Many products that are purchased by a customer result in the customer purchasing 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

Consulting services to set up a network

Video game console

Video game

Using the techniques I described in Chapter 68, it’s easy to determine a demand curve for the product that’s originally purchased. We can then use Excel’s Solver to determine the price for the original product that maximizes the sum of the profit earned from the original and the tie-in products. The following ...

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