Question
Netflix sells a subscription service to 2 types of customers: hardcore movie- watchers who usually watch 10 movies a month and value the service
Netflix sells a subscription service to 2 types of customers: hardcore movie- watchers who usually watch 10 movies a month and value the service at $50 a month (or $5 per movie), and casual movie-watchers who usually watch 5 movies a month and value the service at $30 a month (or $6 per movie). There are an equal number of customers of each type. Netflix wants to set a subscription fee PS and a per-movie charge of PM. What choices of PS and PM would maximize their revenue if they have an equal number of hardcore and casual movie-watchers?
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