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Question - As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 - 0.001Q; on weekdays, it is P = 15 - 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 "royalty" for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once).
1. What type of pricing strategy should you consider in this case?
a. Second degree price discrimination
b. First degree price discrimination
c. Third degree price discrimination
d. Block pricing
2. What price should you charge on weekends?
3. What price should you charge on weekdays?
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