You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties, raskels, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods.

Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of raskels sold decreases by 4% and the quantity of kipples sold increases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together.

Complete the first column of the following table by computing the cross-price elasticity between penguin patties and raskels, and then between penguin patties and kipples. In the second column, determine if penguin patties are a complement to or a substitute for each of the goods listed. Finally, complete the final column by indicating which good you should recommend marketing with penguin patties.

Open the MDS data-set

a. Using the PROXSCAL program, assume that the data are ordinal and compute the distance matrix between pairs of sports for the 50 respondents with two-dimensional MDS

b. Which sports are the most similar according to consumer perceptions? Which ones are the most different?

c. What are the differences between this distance matrix and the one produced by ALSCAL (see exercise 1)?

d. Try and change the type of measure, the initial configuration (the latter from the OPTION menu) and the number of dimensions and find the best output according to the STRESS function

e. Repeat the analysis, this time looking for similarities between respondents for the ten sports on two-dimensions