A10.2 ThomasAir is a new airline that operates as a club airline. Customers purchase a lifetime membership in the ThomasAir Club, after which they can purchase airline tickets to any domestic destination for a single low price. Suppose that you are hired as a pricing consultant by ThomasAir. You quickly notice that ThomasAir has business and vacation customers, each with their own distinct demand for airline travel. The number of tickets demanded by business travelers is qB = 800 - 5P and the number of tickets demanded by vacation travelers is qV = 400 - 2.5P where qB is the demand of business travelers and qV is the demand of vacation travelers. ThomasAir serves an equal number of travelers of each type.

It is, however, unable to determine whether a particular traveler is a business traveler or a vacation traveler, so it is unable to price discriminate. Call P the price of a domestic flight on ThomasAir. You know that ThomasAir’s marginal cost of supplying a flight for one customer is the same for a business or a vacation traveler and is equal to $40, so ThomasAir’s total cost is given by TC1q2 = 40 * 1qB + qV2 You advise ThomasAir to use a two-part pricing scheme. What price should ThomasAir charge per domestic flight ticket? What is the membership fee?