Ted Bair, one of the managers of Cool Toys for Tots, has requested our help in resolving a pricing conflict within the company over a new digital doll it wants to market. Ted’s group has spent valuable resources in gathering data from consumer and producer market surveys in order to help establish a rational price for this doll. Other managers, however, have a gut feeling based on their many years of experience in the business that the selling price should to be $55? per doll. Ted would like to determine the price based on research data, whatever price that may turn out to be. His group could do this for themselves but he thinks it would be better if someone outside the company did the analysis and made a recommendation. So here’s what I think we should do:

1. Based on the survey data (see the attachment), find the demand and supply functions.
2. Calculate the consumers’ and producers’ surplus for the equilibrium point.
3. Determine the consumers’ and producers’ surplus for the company based on the intended pricing of $55 per doll and the demand at this price.
4. Present graphs of the consumers’ and producers’ surplus from 2) and 3)
5. Make a recommendation as to how the company should set its price p and what the demand x would be at this price.

If it’s possible to make a compromise or ”diplomatic” recommendation one way or the other, I’m sure Ted would appreciate it and pass along more business our way.

Attachments: Data File C17 Pricing.xls [.rda]