Reference no: EM13182017
suppose Megabus nds a way to determine if a potential rider is a student or not. They use this information to engage in group price discrimination on their New York to Boston line. The inverse demand curve for non-students is
P = 120 -Q1
The inverse demand curve for students is
P = 60 -Q2/2
The marginal cost of allowing another rider on the bus is $20. (there are no supply constraints)
a. If Megabus group price discriminates, what is the price they charge students and non-students for a bus ticket? How many tickets do they sell to each group?
b. What is Megabus's prot from price discriminating?
c. If Megabus could not price discriminate, they would have to set one price for both students and non-students. What demand curve does Megabus face if they cannot price discriminate? What is Megabus's prot maximizing price and quantity if they cannot price discriminate?
d. What is Megabus's prot from setting one price for both groups? Does Megabus prefer to price discriminate or not?
e. Does price discrimination make students better o, worse o, or have no impact on them? How about non-students?
f. In reality, Megabus occasionally oers a ticket price of $1. What does this tell us about Megabus's actual marginal cost of allowing another bus rider?
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