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The movie industry is somewhat different from other industries in terms of marginal costs. although for simplicity we assumed a flat fee of 33 per
The movie industry is somewhat different from other industries in terms of marginal costs. although for simplicity we assumed a flat fee of 33 per ticket, in realityr theater owners pay an average of 50% of their box office revenue to the movie distributor. They pay more in the first few weeks a movie is released and less in later weeks. In effect, theater owners make most of their profits from concessions [which explains why a large popcorn often costs more than a matinee ticket}. ill-l Soto maximize profit, you want to make sure that your customers buy as many concessions as possible. You decide a bundling scheme is a good option to explore. You currently charge $0 for popcorn and $3 for candy. Market research reports show that customers who buy popcorn tend to also buy a drink. However, customers who buy popcorn tend not to buy candy and vice versa. People buy one or the other, but not both. Your plan, then, is to bundle popcorn and candy together at a discounted price to try to change the consumer behavior from buying one or the other to buying both. The question, as usual, is what price to charge to maximize demand as well as profit. Based on price discrimination and peak-load pricing, you can expect an average of 3,220 moviegoers a month. Suppose these customers are split into four groups, as follows: Group F: only buys popcorn [760 visits} Group C: only buys candy [T50 visits} Group PC: buys both {420 visits] Group N: buys neither [1,300 visits] You consider offering a bundie of 1 popcorn + i candy for $100. The marginal cost of candy is $0.50, and the marginal cost of popcorn is $1.00. Calculate the following bundling scenarios to figure out if you should employ this pricing scheme or not
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