Is auction pricing the best method of maximizing profits?

1. Jack Woodward is home for the summer from college and working in a major league baseball park as a marketing
   intern. He is in an office with two other interns and the general manager has asked them to prepare a presentation on
   ticket pricing. Your intern-team has decided to recommend a profit maximization strategy for ticket pricing and to
   implement that with auction-pricing. Some of the strongest evidence you have to support this proposal is the secondary
   market price for single tickets versus their face value. For the baseball team you are interning for, the face value of a ticket
   is $26; however, the secondary market price is often between $38 and $62. You have also obtained some evidence that in
   2011 the average major league baseball ticket price was substantially below the secondary market for many teams. For
   instance, the average face value of tickets for the Toronto Blue Jays was $24.35, and the secondary market price was
   $72.62, for the Boston Red Sox the face value was $53.38, but the secondary market was at $92.23, and for the Oakland
   Athletics the face value was $21.52 versus $51.82 in the secondary market.
   a. What is the objective of profit maximization?
   b. What does Auction pricing do?
   c. Is auction pricing the best method of maximizing profits?
   i. What needs to be known?
   d. What should the marketing team do?
2. On your next trip to a mail, visit alt the anchor stores and leading apparel stores. Look around at displays and notice if
   they are having sales. Now, based on the amount of merchandise on sale and the amount of reductions, determine if each
   store is using an early or late markdown policy. Explain your reasoning for each store, and especially explain the
   reasoning for differences between the stores. (Note: You can also do this project for different websites. )
   a. What stores did you visit? (Visit a minimum of 3 stores.)
   b. Is each store using an early or late markdown policy? Expiain your reasoning.
   c. Is there a difference in strategies between the stores you visited? What is the difference? Explain the reasoning for
   differences between stores.
3. The ontine retail operation you recently opened is doing well but you are uncertain of your pricing strategy. Currently the
   typical customer purchases four items at an average price of $11.96 and for an average transaction size of $47.84. The
   Cost of goods is 60 percent of sales, which yields a gross margin of 40 percent. You are considering lowering prices by 10
   percent across the board so you can better compete with other music e-tailers. If you tower prices by 10 percent, you
   believe that the average number of items purchased per customer would rise by 25 percent.
   a. Assuming your assumptions are correct, should you lower prices by 10 percent across the board? Why or why not?
   i. tf not, do you have an alternative pricing strategy to propose? What is it? Explain.

Sample Solution