Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Asterix theme park can serve at most 1,000 people per day. The park charges an admission fee, and all rides are free. If p

The Asterix theme park can serve at most 1,000 people per day. The park charges an admission fee, and all rides are free. If p is the price of admission on day i, the demand will be Di(p). The table below displays the demand curves for each day.

Suppose the theme park charges the same admission price on all days. Use the table above to identify a revenue maximizing price.

Suppose the park were free to charge a different price on each day and the demands on each day were independent of each other. What price on each day should be charged to maximize revenue?

Index Day Di (p)
1 Sunday 3100 - 62p
2 Monday 1500 - 50p
3 Tuesday 1400 - 40p
4 Wednesday 1510 - 42p
5 Thursday 2000 - 52.6p
6 Friday 2500 - 55.6p
7 Saturday 3300 - 60p

Table 1: Demand Functions for the Asterisk Theme Park

Now suppose the demands on each day are not independent. A customer planning to attend on day i may choose to attend on day j instead if the price difference is large enough. In particular, for every $1 difference in price, 8 customers will shift days. For example, suppose the base prices for Monday, Tuesday and Wednesday are $20, $22 and $24 respectively. First compute D1(20), D2(22) and D3(24). The actual demand on Monday will be D1(20) + 2 8+48 and the actual demand on Tuesday will be D2(22)28+28. In other words, the $2 difference in price between Monday and Tuesday, means that 2 8 people will shift from Tuesday to Monday. The $2 difference in price between Tuesday and Wednesday, means that 2 8 people will shift from Wednesday to Tuesday. Under this assumption find revenue maximizing daily prices.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Inside And Outside Liquidity

Authors: Bengt Holmstroem, Jean Tirole

1st Edition

0262518538, 9780262518536

More Books

Students also viewed these Finance questions

Question

What symbol denotes the sample proportion?

Answered: 1 week ago