Price Discrimination: SouthSide Salon is a local bar and nightspot in Mankato. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter. Questions:Explain the economic significance of charging a $5 cover for the live musical acts (what kind of price discrimination is this?). Provide two (2) price discrimination schemes of 2nd and 3rd degrees that the bar could implement to increase profitability. Make sure to explain if identification and arbitrage are necessary conditions and why.

Answered: Price Discrimination: SouthSide Salon…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Concept explainers

Question

Price Discrimination: SouthSide Salon is a local bar and nightspot in Mankato. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter.

Questions:

Explain the economic significance of charging a $5 cover for the live musical acts (what kind of price discrimination is this?).
Provide two (2) price discrimination schemes of 2^nd and 3^rd degrees that the bar could implement to increase profitability. Make sure to explain if identification and arbitrage are necessary conditions and why.

Expert Solution

Step 1

The economic significance of cover is that it is an indirect means of generating extra revenue for businesses like bakery restaurants, bars, clubs,hotels,theatre etc. It does not only helps in covering the cost of musical show but also helps in making that exclusive. Apart from that, seats in the restaurants will be occupied generating good amount of revenue through fooding and drinks.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions