MacArthur Hall is considering its pricing policy for a concert taking place 2 months later. Its customer base is composed of two types of Buyers: Music Lovers (M) and Regulars (R). Suppose there are 100 ticket buyers of each type. Suppose that on a good day, each buyer would pay $5 for a ticket on the concert date but on a bad day, each buyer would pay only $2. Suppose for the Music Lovers, the good state occurs with probability and the bad state occurs with probability . For the Regulars, the good state occurs with probability and the bad state occurs with probability .

(a) Suppose MacArthur only sells tickets at the gate (spot pricing). What should be the price of the ticket? What is its revenue?

(b) Alternatively, suppose MacArthur decides to only sell tickets in advance through its website (advance selling). What should be the price of the ticket? What is its revenue?

(c) Compare MacArthurs revenue from the two schemes and explain why one is higher than the other.