Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 8, Problem 2.1P
To determine
Discount ticket outlets and marginal cost.
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In addition to gambling, Las Vegas is famous for its live production shows. Close to 100 shows are performed at various venues across the city on any given day, and many of the shows are multi-million dollar productions with months-long waiting lists for the best seats. Box-of-fice ticket prices range from less than $10 for a few of the smaller shows to over $200 for some of the major productions. In recent years, a number of these shows have begun offering tickets for sale at half price through discount ticket outlets. These half-price tickets are only available on the day of the show, on a first-come, first-served basis. Using the concept of marginal cost, explain why many of these productions have begun to offer these half-price tickets. Who do you suppose are the most and least likely customers to purchase show tickets through these discount ticket outlets? Can you think of any reasons why a production show would choose to not offer tickets in this manner?
The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampa’s profits are shown in regular type. St. Petersburg’s profits are shown in bold.
7. Which cell(s) is/are strategically stable?
You have three tickets to a Celtics game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only four possible buyers of a Celtics ticket. The table below lists the respective reservation prices of these four possible buyers:
Customer Reservation Price
1 $25
2 $35
3 $50
4 $60
You consider inviting bids using an English auction to sell your tickets. How much total revenue can you generate using the English auction mechanism from the sale of the three tickets? [Bids can be made in increments of $1.00]
Chapter 8 Solutions
Principles of Economics (12th Edition)
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