Hedonic Analysis (Use the following Equation. Units are in Dollars)-
Imagine that you are hired to help Huang Electronics enter the high-end TV market where Samsung has established itself as the market leader: You decide to conduct a conjoint/hedonic analysis on potential consumers that examines the difference between Huang televisions and other competitive televisions. Prices paid in the market are depicted by the following model:
Price Paid = 2000 + 350 (Weight = Super Light) + 350 ( Screen = "Hi End Retina") + 200 (Internet Ready = Yes) + 200 (Sound = Advanced) + 100 (SAMSUNG Brand)
The Reference product is as follows: Brand = Huang, Weight = Standard, Screen = Regular , Internet Ready = No, Sound = "Regular"
1. What is the price of the reference product? What is the price paid if the standard product is a "Samsung" (rather than the brand for the reference product)?
Imagine Huang conducts an ad test in which consumers who are asked to sit in an unbiased product comparison sales pitch (Huang vs. Samsung) at a retail outlet like Best Buy. After the experiment, the following hedonic model is estimated from consumers who saw the sales pitch:
Willingness to pay = 2000 + 350 (Weight = Super Light) + 350 ( Screen = "Hi End Retina") + 200 (Internet Ready = Yes) + 200 (Sound = Advanced) + 45 (SAMSUNG Brand)
2. What is the effect of this test ad on the willingness to pay for the Huang TV? Based on this research, would you go ahead with this ad strategy? (Hint: think about why you would or wouldn't engage in this strategy BEFORE answering this question).
3. Imagine that the new product made by Huang in the previous question is essentially a perfect copy of the Samsung TV. What does that tell HUANG about the Samsung?