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3. Different forms of price discrimination Lucia works as a massage therapist on evenings and weekends. She has no fixed costs, and her opportunity cost
3. Different forms of price discrimination Lucia works as a massage therapist on evenings and weekends. She has no fixed costs, and her opportunity cost of giving a massage is $125. She has nine potential clients each week whose reservation prices are shown in the following table: Reservation Price (per massage) Client A $200 B $190 $180 D $170 E $160 F $150 G $140 H $130 I $120 Suppose Lucia has to charge a single price to all of her clients. For each quantity of massages she could give, fill in the Total Revenue column in the following table with the most total revenue she could earn at each quantity of massages. Then, compute the marginal revenue at each quantity of massages and fill in the corresponding Marginal Revenue column. Reservation Price Total revenue Marginal Revenue (per massage) Clients (per massage) (per week) 0 0 1 $200 $ 2 $190 $ 3 $180 4 $170 $ 5 $160 $ 6 $150 7 $140 $ $ 8 $130 $ 9 $120 $ massages. This is than the socially efficient If Lucia has to charge a single price to all of her clients, she will maximize her profit by giving number, which is massages. If Lucia can practice perfect price discrimination, she should give massages. Now suppose Lucia cannot practice perfect price discrimination, but she is able to find a hurdle that identifies the group of clients who are willing to pay at least $170 for a massage (the "ist price submarket), and those who are not (the "discount price submarket). In order to maximize her profit under this pricing scheme, she should charge in the list price submarket and in the discount price submarket. 3. Different forms of price discrimination Lucia works as a massage therapist on evenings and weekends. She has no fixed costs, and her opportunity cost of giving a massage is $125. She has nine potential clients each week whose reservation prices are shown in the following table: Reservation Price (per massage) Client A $200 B $190 $180 D $170 E $160 F $150 G $140 H $130 I $120 Suppose Lucia has to charge a single price to all of her clients. For each quantity of massages she could give, fill in the Total Revenue column in the following table with the most total revenue she could earn at each quantity of massages. Then, compute the marginal revenue at each quantity of massages and fill in the corresponding Marginal Revenue column. Reservation Price Total revenue Marginal Revenue (per massage) Clients (per massage) (per week) 0 0 1 $200 $ 2 $190 $ 3 $180 4 $170 $ 5 $160 $ 6 $150 7 $140 $ $ 8 $130 $ 9 $120 $ massages. This is than the socially efficient If Lucia has to charge a single price to all of her clients, she will maximize her profit by giving number, which is massages. If Lucia can practice perfect price discrimination, she should give massages. Now suppose Lucia cannot practice perfect price discrimination, but she is able to find a hurdle that identifies the group of clients who are willing to pay at least $170 for a massage (the "ist price submarket), and those who are not (the "discount price submarket). In order to maximize her profit under this pricing scheme, she should charge in the list price submarket and in the discount price submarket
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