Explain how the price discrimination method described

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Question: (a) If the theatre were to implement a single-price strategy, what would be the price that maximizes total revenue? (b) [2 point] What would be the total revenue with perfect price discrimination (i.e., charging each segment their max WTP? (c) [4 points] Suppose that the firm is able to implement price discrimination and charge two different prices. They implement this by mailing out personalized invitations to the musical, where some customers receive the full ticket price (marketed as a "donor/sponsor" ticket price), and others receive a discounted price (marketed as a "community discount" ticket price). Assume that nobody at a lower price if they are WTP at the higher price. What would be the two prices that they should charge to maximize revenue? (d) [2 points] Explain how the price discrimination method described in part (c) follows the three "conditions" for successful price discrimination. What degree (first, second, or third) of price discrimination would this be and why?

Reference no: EM133714380

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