Suppose that among the population of potential members of a gym, the reservation value for an annual membership is uniformly distributed between $100 and $900. The per-member marginal cost to the gym is equal to 40% of the member's reservation value. For example, the marginal cost of serving a member with reservation value $500 is 40% $500 = $200. (The idea is that members with higher reservation values use the gym's services more and hence are more costly for the gym.)