Consider the following simplified scenario. Imagine that the Australian national rugby union (for short, Rugby AU) has exclusive rights to organize the games played by the national team. Rugby AU decides that the next match, between the Wallabies and the All Blacks (i.e., the Australian and the New Zeeland national rugby teams), will be hosted at the Marvel Stadium in Melbourne. Rugby AU has no fixed costs for organizing the game, but it must pay a marginal cost MC of $20 per seat to the owners of the Marvel Stadium. Two types of tickets will be sold for the game: concession and full fare. Based on any official document that attests to their age, children and pensioners qualify to purchase concession tickets that offer a discounted price; everyone else pays the full fare. The demand
Consider the following simplified scenario. Imagine that the Australian national rugby union
(for short, Rugby AU) has exclusive rights to organize the games played by the national team.
Rugby AU decides that the next match, between the Wallabies and the All Blacks (i.e., the
Australian and the New Zeeland national rugby teams), will be hosted at the Marvel Stadium
in Melbourne. Rugby AU has no fixed costs for organizing the game, but it must pay a marginal
cost MC of $20 per seat to the owners of the Marvel Stadium. Two types of tickets will be sold
for the game: concession and full fare. Based on any official document that attests to their age,
children and pensioners qualify to purchase concession tickets that offer a discounted price;
everyone else pays the full fare. The demand for full-fare tickets is QF(P) = 120 – 2P. The
demand for concession tickets is QC(P) = 80 – 2P.
j) Suppose that Rugby AU becomes unable to verify the age of its customers; thus, the
formerly distinct full fare and concessional ticket markets must be combined/merged
in one single market. First, write the equation of the merged demand and show it
using a diagram. Then show and calculate the profit maximizing price and number of tickets that Rugby AU will choose to sell, as well its profit
k) How is each category of customers (i.e., full fare vs. concessional ticket customers)
affected by the market merger? Do customers in each category benefit or are they
harmed by the merger? Justify and explain your answer.
l) Given the choice, would a profit maximizing Rugby AU prefer to operate distinct full
fare and concession ticket markets, or just one single merged market? Justify your
answer.
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