The reservation prices (in dollars) of three classes of demanders (classes A, B, and C) for Ricky Parton's (a Latin country-western singer) compact disks are given in the table that follows:ClassCD 1CD 2А115ВС10It costs $4 to produce and distribute each compact disk. The company can sell each CD separately, can put them together as a boxed set (that is, as a pure bundle), or can sell them in a mixed bundling format (offer the CDsboth separately and as a boxed set). Assume that each demander wants only one of each of the CDs at the reservation price (or at any lower price) and that there are an equal number of demanders in each class. Forsimplicity, assume that the only costs are those mentioned herea. What pricing method would you advise Ricky's company to use?b. How much better (profit-wise) is the best pricing method than the second most profitable pricing method?

The reservation price refers to the consumers who have set their reservation price as the highest…

Answered: The reservation prices (in dollars) of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Compute the optimal prices and profits for each of the following scenarios:(a) the goods are sold separately(b) pure bundling(c) mixed bundling. Which strategy would be most profitable? Explain why.
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Each consumer has the following demand for annual visits to Planet Fitness: Q = 200 - P (or P = 200 - Q), where Q is the number of visits to Planet Fitness per year and P is the price per visit. In western Maryland, Planet Fitness has a monopoly on the gym market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that Planet Fitness could charge each customer? Annual fee = $18,050; P = $0 for each visit. Annual fee = $20,000; P = $0 for each visit. Annual fee = $18,050; P = $10 for each visit. Annual fee = $20,000; P = $10 for each visit.
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10.
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4) Provide a real-world example of third-degree price discrimination (with a hyperlink to the example. The page you link to should be in English). Discuss what prevents re-sale in your example (i.e. why can't people who pay a lower price sell the good to people who face a higher price?).

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