Question
Orange is the only supplier of rental scooters in the city of Los Angeles. Lately they have noticed that demand for scooters differs between students
Orange is the only supplier of rental scooters in the city of Los Angeles. Lately they have noticed that demand for scooters differs between students (college age demographic) and those older. Their research team estimates the inverse demand function to be P = 20 0.02Q for students and P = 10 0.2Q for others, where Q represents scooter rental hours per day. They have a marginal cost of $2 per rental hour and no fixed cost. Compare and contrast the following pricing strategies in terms of optimal price, quantity, and the resulting profit:
a. Third-degree price discrimination
b. Two-part pricing. (Hint: Apply two-part pricing to each segment separately.)
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