Transcript Answer - CSUNEcon.com

Economics 310
Price Theory
Price Discrimination Homework
Department of Economics
College of Business and Economics
California State University-Northridge
Professor Kenneth Ng
Wednesday, April 5, 2017
GENERAL ADMISSION
$42.99
One day ticket
Children 48" and
Half price $21.50
under
Half price $21.50
Seniors 55 and +
Children 2 and
FREE
under
$7.00
Parking fee
Combo ticket for
$52.99
both parks
SIX FLAGS MAGIC
MOUNTAIN SEASON PASS
$85.00
Individual
Family (family of
$280.00
four)
Additional Family
$70.00
Pass
Magic
Mountain/Hurricane
Harbor Combo Pass
$115.00
Six Flags Magic Mountain Season Passes purchased now are good until December 31, 2001.
Buy your Six Flags Magic Mountain Season Pass and enjoy unlimited visits throughout 2001. It is
good at all Six Flags theme parks across the country, including Six Flags Marine World in Vallejo,
CA. (Passes must be processed at park they are purchased from.) Plus, passholders receive
newsletters with important park information and various bonus coupons! Season Passes are
available at the front gate or by calling (661) 255-0208.
List the pricing scheme(s) used by Six Flags for the Magic Mountain and Hurricane
Harbor amusement parks. Give a brief description of each type of pricing scheme(s)
utilized.




Bundling: Combo Pass
3rd degree price discrimination-adult, children’s, seniors prices.
All-or-nothing offer: Admission to park.
Quantity Discount: Family pass.
 Choose two of those scheme(s) and show graphically and explain
the economic logic behind each scheme.
All or Nothing Offer
.
The total willingness to pay is the
are under the demand curve to Q*.
Price
D
MR
Consumer
Surplus
The admission price will be set to
grab off as much of the total
willingness to pay as possible.
The limiting factor is knowing the
person’s demand curve.
Profit: $42.99
Consumer
Surplus
0
Quantity
per week
Q*
Third Degree Price Discrimination plus All-orNothing Offer.
The individual on the left has a higher willingness to pay.
If the monopolists makes an all-or-nothing offer to the person on the left, he will
forego the profit he could earn from the person on the right.
By engaging in third degree price discrimination, the monopolist can increase his
profits by making separate all-or-nothing offers.
D
MR
Price
D
Price
Consumer
Surplus
Profit: $42.99
Profit: $42.99
Profit:
$21.50
Consumer
Surplus
0
0
Bundling
The graph shows the maximum willingness to pay
for three individuals-A, B, and C for admission to
Magic Mountain and Hurricane Harbor.
Magic
Mountain
D wants to go only to Magic Mountain.
$42
A wants to go only to Hurricane Harbor.
D
If the firm charges $41.99 and $19.99, the will
get a total of $60.98 from A and D. B will not buy.
By bundling the two parks together for $52.99,
the monopolist will get revenue from B and not
lose any revenue from D and A.
40
B
A
15
19.99
Hurricane Harbor
Quantity Discount-Family Season Pass.
The graph shows the demand for a family of 8.
The first admission costs $85.
Admissions 2-4 cost $65 each.
Price
D
The next 4 admissions cost $17.50 each.
The more admissions the family buys the lower
the unit price.
Profit: $85
Profit: $195
Profit: $210
0
1
4
8
Quantity
per week
Q*