Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 19

This past year, Used Imported Autos sold very few cars and lost over $500,000. As a consequence, its manager is contemplating two strategies to increase its sales volume. The low-cost strategy involves changing the dealership name to Quality Used Imported Autos to signal to customers that the company sells high-quality cars. The high-cost strategy involves issuing a 10-point auto inspection on all used cars on the lot and offering consumers a 30-day warranty on every used car sold. Which of these two strategies do you think would have the greatest impact on sales volume? Explain.