It is a nice day in Houston, Texas. You own a small hardware store and have to compete with many other stores for sales. You sell water to construction workers and gardeners, who buy your one pint bottles. You usually sell them for $1 each. You generally pay $.50 for each bottle from your long time supplier. You usually sell 10,000 bottles per month.
In July, the water bottle company comes to you and says that they have a special. If you will buy 5 months of bottles, they will sell them to you for $.25 each. You have a little space in a warehouse, and think the savings is worth it. You get the bottles on September 1 and you start thinking of promotions you can do to sell them.
On September 10, Hurricane Harvey hits, and after the rains come down, there is a desperate need for your water. In your neighborhood, where you have been for years, people really need the water, since the National Guard is only interested in downtown, where the press is. So, you have a chance to sell the water. You think the prices and times to sell it all will be
Price Time to sell all
$ .50 1 day
$1 1 week
$2 2 weeks
$3 3 weeks, but if the National Guard shows up, the price will probably be $2
$5 5 weeks, but if the National Guard shows up, the price will be $1 after that
What price shall you choose? $_________________
What other factors matter ?
Presume that you don’t own the store, but that you are the store manager. You receive a bonus of 10% of the pretax profit from the sales at the store. You are hoping to earn the bonus to make a down payment on a car and pay for this Business Law class. The store owner asks what price you will charge.
