The owner of the theater in Exercise 1 would like to experiment with segmenting the market into people who have a willingness-to-pay >$17(evening session) and those who have a willingness-to-pay less than or equal to $17(matinee session).The owner still pays $10 in royalties per person who views the film.

a.Find the price per ticket for the two market segments that maximize contribution.If there is no cannibalization, how many people would you have in each of the sessions?How much will the theater owner make?

b.With segmentation, the theater owner should increase her profit.If the segmentation is fair the consumers should also increase their benefit (surplus).Find out

i)how much the theater owner benefits from the segmentation of the market into matinee and evening sessions.

ii)Find the consumer benefit (surplus).

iii)Find the maximum cannibalization rate that would not make it worthwhile to segment the markets into HWTP: p>$17 and LWTP:p<=$17.

c.Assume that the theater owner wants to experiment with segmenting the market into people who have a willingness-to-pay > $20 (evening session) and those who have a willingness-to-pay less than or equal to $20 (matinee session).Who benefits more with this price differentiation scheme the owner of the theater, the consumers, both, neither?