3. Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is D 1 J (q) = 1202q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants, paying $40 for each, which is the marginal cost his round imposes on the Club.

(a) What membership fee would maximize profit for the Club?

(b) The manager could have charged Joe a single price per round, instead. How much extra profit does the Club earn by using two-part pricing?

(c) Assume now that Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is D 1 S (q) = 140 2q. The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's original deal? How much more would the club make if it charged Susan and Joe separate prices?