We thought we'd dive into one of the specific questions that we ask

you to prepare.

In particular, look at question four.

Suppose we're considering charging $15 for a light bulb.

How much more would a consumer be willing to pay for

a bulb that uses only five watts of power?

I think that's what we should dive into, Thomas.

>> That is an interesting question, and

I'm sure many learners are scratching their head, literally, how to do it.

So let's walk through it step by step.

>> Yes, yes. Would you help me with this

a little bit so I can get these numbers up?

So the way we solve a problem like this is the first thing we ask ism how much

additional utility does the consumer get when we move from ten watts to five watts?

Remember, moving down in watts is a good thing.

That's less power consumption.

So let's get the utility difference here.

>> So at 5 watts, >> Okay.

>> The utility is 12.5.

>> Okay.

>> And at 10 it's 6.1.

>> 6.1, okay so we see that increase in utility and

if we do the calculation here, what do we get?

We get 6.4, and what that means is,

if we go from ten to five watts, we get 6.4 more in utility.

Now we've gotta translate that into prices, right?

>> So in other words, how much are those incremental 6.4 utilities worth for

the consumer so that it's equalized again?

>> Right, right, I think that's the best way to go forward with it.

Right now the question says we're at $15 on the price.

>> And there we have a utility of -5.3.

>> Okay, -5.3, okay.

Now, and then, well, that's what we're starting.

Now how much more utility can we take away from them on the price front?

Well, we just calculated that, it's 6.4.

So if I take the -5.3 and I reduce that by even 6.4 more,

what I get is, I'm down at 11 or -11.7 in the utility.

Now let's just eyeball this for a minute,

because I think that's really all we have to do to understand what's going on.

So let's look down at your conjoint analysis output to try and

figure out where -11.7 is.

>> And we are at -7.7 at $19, [COUGH] and then at -15.6, and then we are at $21.

So it's somewhere in between there.

>> Exactly, okay, so it looks like this is about halfway between these

two numbers on the 19 and the $21 price point.

So we're about at $20 here.

And what that tells you is how much more are people willing to pay?

Well, we started at $15, they're now willing to pay $20.

That's a pretty big price bump.

So they're willing pay $5 more for that product improvement.