Introduction or Executive Summary – In one to two paragraphs report your price recommendations and provide a concise summary of the procedure you used to arrive at them. Demand estimation – Explain briefly the concept of a demand curve and how the market experiment allows it to be known. Explain the procedure in estimating it. State your estimated demand curve. Discuss how well regressions fit the data. Give a warning on when your estimates should not be used. Cost estimation – Explain how you estimate costs. Show total costs as function of output quantity, and comment on how closely it fits the data. Discuss what might render your estimates obsolete. First price recommendation – Present your recommendations for a profit-maximizing price under the assumption the market conditions and production technology remain stable. Forecast revenue and profits at that price. Second price recommendation – Present your recommendations for a profit-maximizing price assuming costs change so that the fixed cost becomes $3,200 with constant marginal cost of $24 per unit of output. Give revenue and profit targets.
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