Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Problem 3: Menu Pricing. There are two types of fans of Kansas City Chiefs games: Enthusiastic (E) and Unenthusiastic (U). Each Enthusiastic fan has a
Problem 3: Menu Pricing. There are two types of fans of Kansas City Chiefs games: Enthusiastic (E) and Unenthusiastic (U). Each Enthusiastic fan has a representative demand curve given by PE = 120 -5QE, and each Unenthusiastic fan has a representative demand curve given by Py = 120 -8Qv. The marginal cost of ticket production is constant at MC = 40 for all consumers. 1. Suppose the Chiefs can perfectly distinguish between two types of fans and charges a two-part tariff for each type. a) What fixed fee and per unit price will they choose for Enthusiastic fans? For Unethusiastic fans? b) What is the consumer surplus for each type of consumer? c) What are the profits for the Chiefs from each type of consumer? 2. Suppose instead that the Chiefs can't distinguish between two types of fans. Instead of setting a single constant price per game, the Chiefs engages in menu pricing. a) What are the optimal ticket packages (menu pricing) set by the Chiefs? b) What is the consumer surplus of each type of consumer? c) What are the profits for the Chiefs from each type of consumer
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started