CASE 

1 ‐ Solution
Category of Value Off‐Grade Resin Alathon 25 Diff. Value
Replacing pipe 0.10*$10 0.05*price $1 ‐ 0.05*price
Labor cost 0.10*$60 0.05*$60 0.05*$60 = $3
Crop damage 0.10*0.20*$70 0.05*0.20*$70 0.05*0.20*$70 = $0.7

REFERENCE DIFFERENTIATION $1 + $3 + $0.7 – 0.05*price

VALUE VALUE

EVC = $10 + $4.7 – 0.05*price

Assumption 1: If the new pipe goes bad, the farmer will buy Off‐Grade Resin
price = $10     EVC  =  $10  +  $4.7  – 0.05 * $10    EVC  =  $14.20

Assumption 2: If the new pipe goes bad, the farmer will buy again Alathon 25
price = EVC      EVC  =  $10  +  $4.7  – 0.05 * EVC   EVC  =  $14
CASE 2 – Solution 
Category of Value Aspirin Plavix Diff. Value
Patient w/ surgery 0.223*$100,000 0.159*$100,000 $6,400

Category of Value Aspirin Plavix Diff. Value

Patient w/out surgery 0.049*$100,000 0.047*$100,000 $200

REFERENCE DIFFERENTIATION
VALUE VALUE

EVCS = $10 + $6400 =   $6410 (Patient w/ surgery)

EVCN = $10 + $200 =   $210 (Patient w/out surgery)

WHICH PRICE WE CHOOSE FOR 1,000 PILLS? Check revenue!
Price = $210   Quantity = 100M  Revenue = 21B
Price = $6410   Quantity = 5M  Revenue = 32.05B