Disney Introduces Demand-Based Pricing at Theme Parks

LOS ANGELES For the first time, tickets to Walt Disney World in Florida and Disneyland in California will cost more during holidays and some weekends than during slower periods.

At Disneyland, single-day tickets now cost $99. Starting now, the park will charge three different prices based on the calendar. "Value" tickets, for Mondays through Thursdays during weeks when most schools are in session, will drop to $95. "Regular" tickets (most weekends and many summertime weeks) will climb to $105. "Peak" tickets (most of December, spring break weeks, July weekends) will cost

$119.

The demand, marginal revenue and total cost curves of Disneyland are P = $150 - $2.5Q, MR = $150 -

$5Q and TC = $40Q, where P is the price of a single entry of Disneyland, and Q is the number of entry of Disneyland in thousand units.

At Disney World, which includes four major theme parks, the price changes are varying by park. At the most popular Disney World Park, the Magic Kingdom, single-day prices will remain at the current level,

$105, for value periods. Prices will rise to $110 for regular periods, and to $124 for peak.

"In addition to expanding our parks, we are adopting seasonal pricing on our one-day ticket to help better spread visitation throughout the year," a statement from the company said. "Multiday tickets, annual passes and visiting during nonpeak periods also provide our guests with options and savings." A Disney spokeswoman comment.

Source: Adapted and modified from Brooks Barnes. Dis ney Introduces Demand-Based Pricing at Theme Parks, viewed on 22 February 2017, available at <https://www.nytimes.com/2016/02/28/ business/disney-introduces-demand-based-pricing-at-theme-parks.html>

Required:

a) Is the Disney group practicing price discrimination? Explain.(2 marks)

b) Examine any THREE (3) conditions that must be fulfilled by Disney Group in order to practice price discrimination and extract maximum profit.(6 marks)

c) Based on the case study above, calculate the profit-maximizing price, output, profit and consumer surplus for Disneyland.(11 marks)