3. Different forms of price discrimination

Megan works as a golf instructor on evenings and weekends. She has no fixed costs, and her opportunity cost of giving a lesson is $66.

She has nine potential clients each week whose willingness to pay are shown in the following table:

Client	Willingness to Pay
(Dollars per lesson)
A	100
B	95
C	90
D	85
E	80
F	75
G	70
H	65
I	60

Suppose Megan has to charge a single price to all of her clients.

For each quantity of lessons 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 lessons. Then, complete the table by computing the marginal revenue at each quantity of lessons.

Clients	Willingness to Pay	Total Revenue	Marginal Revenue
(Lessons per week)	(Dollars per lesson)	(Dollars per week)	(Dollars per lesson)
0		0
1	100
2	95
3	90
4	85
5	80
6	75
7	70
8	65
9	60		If Megan has to charge a single price to all of her clients, she will maximize her profit by giving lessons. This is than the efficient number, which is lessons. If Megan can practice perfect price discrimination, she should give lessons. Now suppose Megan 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 $85 for a lesson (the "list 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.