Explain the concept of price discrimination

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Reference no: EM13816245

A movie theatre has a cost function which entails the rent of the commercial building of $50 per day (fixed cost) and a marginal cost of $5 per viewer. There are eight potential viewers (four of them are students and four of them are not) with buyer values given in the table below

Students

Others

$19

$22

$13

$18

$11

$16

$10

c) Assume now that the movie theatre can give price discounts to students. Explain the concept of price discrimination and the type of price discrimination in the context of the current example. Is this a direct or indirect price discrimination? Explain the market conditions which allow sellers to price discriminate (discuss in detail at least three conditions).

d) Determine the optimal ticket prices for students and for others. Determine the revenue of the movie theatre. Determine the optimal decision of the movie theatre in the short and in the long run. Explain your approach.

Reference no: EM13816245

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