Question 1: (10 pts.)
Below is a table of average sale information that a local small grocery store has collected from 4pm to 6pm on every Friday.
- Use Market Basket Analysis (Support, Confidence, and Lift) to compare two cases.
o Case 1: Consumer who bought potato chips also bought milk Case 2: Consumer who bought soda also bought milk
o What does the result in a) imply? Please interpret the results in a). - Based on the results in a), suggest a strategy which the store owner could implement to increase sales of milk.
Question 2: (10 pts.)
You are selling a software product called “Link” which is available in high- and low-quality versions called Link Professional and Link Home respectively. You have 2 units of Link Professional and 2 units of Link Home.
There are 2 potential customers, each of whom is interested in buying 1 unit of Link (either Link Professional or Home but not both). Suppose that your objective is to maximize the total revenue from selling the software. Further, you do not know the identity of either buyer and you must sell by posting one price for Link Professional and another price for Link Home. Each buyer seeks to maximize her consumer surplus and may buy Link Professional or Link Home or neither depending on the prices that you post. Please show all intermediate steps and clearly explain your reasoning.
- What is the optimal price and resulting revenue under the following scenario? What (if anything) would each customer buy?
- If you could identify each buyer and make targeted offers, what price would you offer to each and how much revenue would you earn? What (if anything) would each customer buy?
Scenario The willingness to pay (WTP) of the 2 potential buyers is:
Question 3: (10 pts.)
Read part of 2013 Macworld article about Appstore below to answer the following questions:
- Does Appstore provide a two-sided platform.? If yes, are there the same side and cross-side network effects? Please
- Does Appstore operate in a market that exhibits “winner take all” dynamics?
The App Store turns five: A look back and forward
By Lex Friedman Jul 8, 2013
Five years ago, the App Store was born. A million apps, billions of dollars, and an uncountably high number of Angry Birds later, the store is unquestionably a smashing, unrivaled success. These days, customers download more than 800 apps every single second.
When the iPhone launched in 2007, Steve Jobs famously told developers that they could write “apps” for the device by creating Web apps. Developers mostly scoffed at that pronouncement
—some went so far as to jailbreak their phones just so they could play around with creating software for the revolutionary new device.
Respite came in March 2008, when Apple laid out the roadmap for iOS development—including a software development kit (SDK) for programmers to write their own apps—and announced that it would provide a storefront through which developers could sell their software.
The App Store launched on July 10, 2008, with a whopping 552 apps on its virtual shelves; the most common prices were $1 and $10, and there were a mere 135 free apps.
In the intervening years, the App Store has made some developers fabulously wealthy; gave some a new, stable career; and left others with broken dreams and disappointments. But owners of iOS devices didn’t focus on the App Store lottery—they simply cheered the many awesome new abilities their devices gained.
This is the story of the App Store’s success; it’s a success that has come in the face of plenty of issues with the store, many of which persist even to today. But more on that in a bit.
Not so humble beginnings
Among those 552 launch apps were many that still grace our home screens: MLB.com At Bat, Facebook, Yelp, Shazam, and Super Monkey Ball, to name a few. The App Store launched simultaneously in 62 countries; then, as now, it was accessible from a devoted iOS app, or as a feature sort of crammed into iTunes.
The App Store’s first weekend saw more than 10 million app downloads. Less than a month later, Sega’s Super Monkey Ball hit 300,000 downloads, netting Sega $3 million and Apple more than $1 million of its own, thanks to the store’s 70/30 revenue split.
By September, the store had surpassed 100 million downloads, and when the end of 2008 rolled around, the most downloaded app of the year, with 5 million downloads, was Facebook. Of course, since that particular app was (and remains) free of charge, those downloads didn’t translate directly into dollars for Facebook or Apple. But as the App Store’s fortunes rose, so too did the iPhone’s, and later the iPad’s. And Facebook’s mobile usage went through the roof.