Rogers Company Case Summary

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While raising the price is usually a central driving force to boost the profit of the company, inappropriate price level will also result loss in potential profits due to the shrink in number of consumers. In broadband service industry, Rogers Company provides the broadband service and consumers are making the purchase decision based on their preferences toward the service and the benefit they received from the purchase. When the benefit they captured from the product is not equivalent to the money they paid, consumers may stop purchasing it. In order to justify the price increase, company can set the higher product quality and adding some other value-added services. Sometimes providing extra free service will attracting more consumers and generate more profits. But in long run situation, without charging additional cost, the action of providing improved services will cost company a quite large number of expenses. This memo interprets the demand and utility of broadband service based on its cost and VFS (assigned non-cost attribute) and comments fairly on both proposals. …show more content…
Based on the Utility model from the Household Demand for Broadband Internet in 2010 BE journal of Public Economics, the coefficient of the cost is negative, which is -0.021. It implies the increase of $1.5 in cost will decrease the utility by 0.0315 units, as VFS is constant here. In order to keep the quantity demanded and utility constant when price is increased by $1.50, Rogers should provide value-added service, VFS, by 0.0312 units (since each $1 increases in cost, VFS needs to increases 0.208

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