Case 1 � Abigail Faith: Statistical Analysis of Pricing Compliance in AFB Company's Software Licensing Model
A case study analyzing pricing compliance in AFB Company's software licensing model using statistical methodologies.
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CASE 1 – Abigail Faith
This problem is one which I worked on as a consultant. Nothing is changed except the name of
the CEO and the company.
Abigail Faith is the CEO of AFB Company, a purveyor of computer-aided design software.
Abigail has instructed her distributor that her software should be licensed to industrial customers
at annual fees, F, which should depend principally on two factors - the number of designers, D,
and the number of work stations, W, at each company, according to the following relation:
F = X DY WZ,where X = 1000, Y = .55, and Z = .15
While Abigail allows her distributors some latitude in pricing in order to "get the sale," she's
concerned that her instructions may not have been taken seriously. Based on the following data
(random sample of 50 clients), the question is whether there is evidence that Abigail's guidelines
are not being observed.
Client Designers
(D)
Work Stations
(W)
Annual Fee
(F)
1 50 10 $12,146
2 394 172 $21,030
3 535 288 $21,659
4 236 13 $14,951
5 266 264 $32,021
6 363 148 $23,086
7 244 17 $25,228
8 182 116 $18,575
9 543 525 $38,066
10 87 72 $9,042
11 891 51 $20,010
12 561 499 $52,978
13 978 790 $40,364
14 821 469 $45,340
15 675 582 $61,629
16 863 779 $30,522
17 612 456 $48,157
18 884 275 $36,763
19 75 35 $10,422
20 517 76 $15,125
21 192 173 $11,836
22 324 29 $23,531
23 55 52 $7,798
24 787 111 $27,471
CASE 1 – Abigail Faith
This problem is one which I worked on as a consultant. Nothing is changed except the name of
the CEO and the company.
Abigail Faith is the CEO of AFB Company, a purveyor of computer-aided design software.
Abigail has instructed her distributor that her software should be licensed to industrial customers
at annual fees, F, which should depend principally on two factors - the number of designers, D,
and the number of work stations, W, at each company, according to the following relation:
F = X DY WZ,where X = 1000, Y = .55, and Z = .15
While Abigail allows her distributors some latitude in pricing in order to "get the sale," she's
concerned that her instructions may not have been taken seriously. Based on the following data
(random sample of 50 clients), the question is whether there is evidence that Abigail's guidelines
are not being observed.
Client Designers
(D)
Work Stations
(W)
Annual Fee
(F)
1 50 10 $12,146
2 394 172 $21,030
3 535 288 $21,659
4 236 13 $14,951
5 266 264 $32,021
6 363 148 $23,086
7 244 17 $25,228
8 182 116 $18,575
9 543 525 $38,066
10 87 72 $9,042
11 891 51 $20,010
12 561 499 $52,978
13 978 790 $40,364
14 821 469 $45,340
15 675 582 $61,629
16 863 779 $30,522
17 612 456 $48,157
18 884 275 $36,763
19 75 35 $10,422
20 517 76 $15,125
21 192 173 $11,836
22 324 29 $23,531
23 55 52 $7,798
24 787 111 $27,471
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Subject
Business Law