After a thorough analysis of the study, benefits can be weighed in terms of benefits to

the farmer per bird per year Benefits are being calculated on per year because chicken
lays eggs for about a year and lenses are not reusable

The visible sources of benefits are:

Reduced chicken mortality.

Mortality reduced from 9% to 4.5%
The cost of a chicken = $ 2.4 x 4.5%
Reduction in mortality = 10.8 cents

The benefits are most sensitive to the assumption that lenses work to reduce
mortality. For example, if lenses were to fall off, mortality may go back not to 9%,
but to 25% since chickens are not debeaked. The benefit of reduced mortality then may
be negative.

Feed savings
Assume that the feed depth is reduced by ½ inch. It may have been assumed that the
feed depth is reduced by 1 inch. But that the data in the case about per 1 inch
reduction has nothing to do with debeaking.

156/2 (for ½ inch per day ) x 1/20,000 (per chicken) x $ 158/2000 ( per lb) x 365 days =
11.25 cents

The whole calculation is hypothetical since the data is not on the chickens with lenses
vs. debeaked. But the risk is probably limited and there is no reason to believe that
chickens will bill more or eat more. So, probably more upside potential then its
downside.

Extra egg production

This is because of less trauma to chickens during the process of inserting lenses
against debeaking. Based on one egg increase relative to debeaking per chicken
per annum: 1 egg * 1/12 * $ 0.53 = 4.5 cents. But since most costs are not variable in
eggs, one should use revenue per dozen as opposed to average profit per dozen. The
case study does not elaborate on weekly or yearly production of eggs with regards to
lenses and/or debeaking.

Labor cost of inserting lenses versus that of debeaking

This can be seen as a wash (220/hr debeaking vs. 225/hr. lenses). But sensitivity to
the assumption of new labor costs can not be calculated with data available. We know
the old cost, but the new estimate of chicken/hour is from one team only. Thus the total
calculable economic benefit to the chicken farmer over debeaking = 25.75 cents

Other benefits/risks:
Some other benefits you might have thought about:

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 Human treatment.
But would it be worthwhile to educate consumers? Probably not = $0 benefit.
Things that can go wrong – since this is a new product: increased mortality if lenses are
not placed in correctly or have side effects (i.e., eye infections).

Pricing Policy
Price must be set below value (25.75c/pair) by an amount dependent on
1) risk assessment and
2) switching costs and price sensitivity.
The higher the estimate of risk, the lower the price; the more price sensitive is the
farmer, the lower the price (according to the case, farmers are price sensitive). At the
same time, since the company does not have resources to go for the whole market
(financial constraint), it may be ok with small market share, i.e., with relatively high
price.

Cost/Savings benefit to the farmer Vs Debeaking

Debeaked ODI Savings

Morality .216 .108 .108
Feed 7.04 6.9275 .1125
Labor .34 .0825 .2575
Egg Laying .099 .099
Total Saving 1.468
Cost of Lens (0.08)
Total Savings per Bird 1.388

*Above all figures are in dollars

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