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Another reason why I think you'd have 3 plans is so people can compare. If you offer 3 products, 2 that are similar and 1 that is different, most people will discard the dissimilar item and compare the remaining 2, making a decision based on those two. Example: Buying a blender. You need a blender to make awesome drinks at your next party. You don't know anything about blenders, so how to choose?
1) 5 speed blender, $35
2) 7 speed blender, $45
3) 7 speed stainless steel blender, $95 If you're price sensitive, you would probably discard the $95 blender as it's too expensive. Then you're comparing 5 speeds for $35 vs $45 for 7 speeds. Maybe there's some other small distinctions, like the finish on the $45 blender which would make it seem better. You go with the $45 blender because it's the obvious better of the two, and you know nothing of blenders. A store may have some incentive to prioritize the selling of #2, since it makes them more profit, which is why they've shown you these 3 particular blenders. However, there's a segment of customers who will buy the most expensive item because it somehow fits for them. In this case, it might be the stainless steel which matches their other appliances. They put a premium on that feature and are willing to pay for it, and you can use Patrick's "consumer surplus" rule for that. |