What is the optimal protection level for full-price seats

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You must show detailed numerical analysis and quantitative formulas in an Excel Model (xlsx file submission) (step-by-step) to get credit in this question.

Ron, the director at the Annenberg Theater, is planning his pricing strategy for a musical to be held in a 400-seat theater. He sets the full price at $120 and estimates demand at this price to be normally distributed with mean 300 and standard deviation of 100. Ron also decides to offer student-only advance sale tickets discounted 75% off the full price. Demand for the discounted student-only tickets is usually abundant and occurs well before full price ticket sales.

Question I. Suppose Ron sets a 300-seat booking limit for the student-only tickets. What is the number of full-price tickets that Ron expects to sell?

Question II. Compute the Expected Total Revenue for Ron considering the arrangement in part I.

Question III. Based on a review of the show in another city, Ron updates his demand forecast for full-price tickets to be normal with mean of 200 and standard deviation of 50, but he does not change the ticket prices. What is the optimal protection level for full-price seats?

Reference no: EM133469406

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