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What is the pricing strategy

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Consider a ski resort owned and operated by a local monopolist. Assume that the resort's clients are of two types: old and young.

A typical old client's inverse demand is P = 12 - Qo and young client's inverse demand is P = 16 - Qy.

Suppose the marginal cost of operating each lift ride is c = $4 and fixed cost of operating each day is $0.

First, assume that the ski resort owner can identify the true type of each skier, and can prevent reselling.

  1. Suppose first the owner employees a third-degree price discrimination. Entry to the resort is free, the resort owner sets a price per ski lift ride to each type of skier, and the skiers decide how many lifts rides to buy at that price. What are the prices? What is the total profit if there are 100 young skiers and 100 old skiers?
  2. What is the consumer surplus for each young skier? What is the consumer surplus for each old skier?
  3. Can the ski owner increase profit by using two-part tariff? If yes, what is the pricing strategy? What's the total profit?
  4. Can the ski owner increase profit by using menu pricing? If yes, what is the pricing strategy? What's the total profit?

Reference no: EM132414032

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