You are the marketing manager of College Cinema. The finance manager, who is your enemy in the company, suggests that charging different prices to LeTall and Livayette students would certainly be a profitable move. There is only so much the finance manager knows about marketing. As the marketing manager, you know that it is costly to implement the group price discrimination, because the company needs to hire additional staff to monitor and identify the student groups by screening their IDs. You estimate that there is a fixed monitoring cost of 10 for that. Report to the CEO of the company expressing your view on whether your enemy's proposal makes sense or not.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A movie theater in Ellentown, College Cinema, specializes in movies for college students. College Cinema is considered a monopoly in the region, and it serves two groups of moviegoers, LeTall University students and Livayette College students. LeTall students' demand function for movie tickets is QL=20-pL, and Livayette students' demand function is Qv=30-pv. The movie theater incurs zero marginal cost for serving additional customer, but there is a fixed cost of showing a movie at 20.

1.

You are the marketing manager of College Cinema. The finance manager, who is your enemy in the company, suggests that charging different prices to LeTall and Livayette students would certainly be a profitable move.

There is only so much the finance manager knows about marketing. As the marketing manager, you know that it is costly to implement the group price discrimination, because the company needs to hire additional staff to monitor and identify the student groups by screening their IDs. You estimate that there is a fixed monitoring cost of 10 for that. Report to the CEO of the company expressing your view on whether your enemy's proposal makes sense or not.

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