(NB: Consult the examples in Chapter 7 if needed). An amusement park will introduce a new pricing scheme before the next season. It wants to set an entrance fee and a fee for each ride in the park. A market survey shows that the price– response function for the entrance part can be described by the following function:

where E is the entrance fee. The price– response function for each ride can be described by:

where p is the price per ride. The variable unit costs are estimated at $2.00 per entrance and $1.50 per ride. What is the optimal (profit- maximizing) two- part tariff in this case? You can solve the problem any way you want, but the objective function that shall be maximized is:

Transcribed Image Text:

d(E)=5,000-100E