Maximizing Cookie Profits at Kroger

What types of Vanilla Wafer cookies should Kroger stock to maximize profit?

Given the wholesale costs and customer valuations, how should Kroger price each type of cookie?

Answer:

To maximize profit from cookies, Kroger should stock the brands that yield the highest overall valuation from customers. Based on the provided customer valuations and wholesale costs, Kroger should price the cookies as follows: National 1 at $1.5, National 2 at $2.00, Generic at $0.90, and Copycat at $1.25.

Explanation:

To determine the optimal pricing strategy for each type of Vanilla Wafer cookie, we need to calculate the overall valuation for each brand based on the customer valuations and the given wholesale costs. The valuation for each customer-brand combination is obtained by multiplying the customer's value by the corresponding wholesale cost.

Using the provided valuations and wholesale costs, we can calculate the total valuations for each brand:

• National 1: Customer 7 value * Wholesale cost = 1.02 * 1.5 = 1.53
• National 2: Customer 8 value * Wholesale cost = 1 * 2.00 = 2.00
• Generic: Customer 9 value * Wholesale cost = 1.003333 * 0.90 = 0.90
• Copycat: Customer 10 value * Wholesale cost = 1.006667 * 1.25 = 1.26

Summing up the valuations for each brand, we find that National 1 has a total valuation of 1.53, National 2 has 2.00, Generic has 0.90, and Copycat has 1.26. To maximize profit, Kroger should stock the brands with the highest valuations, which are National 2 and National 1.

Therefore, the recommended pricing and stocking strategy for Kroger should involve pricing National 1 at $1.5, National 2 at $2.00, Generic at $0.90, and Copycat at $1.25. This approach aligns with maximizing profit by considering customer valuations and wholesale costs.