Your consulting company is hired by Workout Wonderland, a gym in Evanston, to reconsider its pricing policies. Over the last few years, Workout Wonderland has been collecting a lot of data on its customers. Analyzing this data, you discover that the 1100 Fitness Fanatics which frequent Workout Wonderland are remarkably consistent and similar; each customer is willing to pay $50 for the first time they exercise in the gym in a given month, $40 for the second time and $20 each for the next ten visits per month. They never go to the gym more than 12 times per month. Workout Wonderland's marginal cost of serving a customer is zero (because what they pay for laundering towels, they make back on drinks and concession sales).

Workout Wonderland is charging $240 per month for its gym membership, which allows members to go to the gyms as much as they like. You recommend that Workout Wonderland should increase the price. What price should you recommend? How much more profit per month will Workout Wonderland get as a result?

Workout Wonderland adopts your recommendation in part (a) and you leave for greener pastures after a job well done. However, a few months later, you get an alarming phone call from the Workout Wonderland CEO: they have lost nearly all of their members. Since you left, Workout Wonderland did some more market research which showed a potential opportunity: 500 Instagram Influencers in Evanston who are willing to pay $30 for the first two gym visits every month (they never go to the gym more than twice a month). To accommodate them, Workout Wonderland introduced a daily gym pass at a price of $30. What went wrong?

The Workout Wonderland CEO wants to abandon the daily pass and just offer the membership at the price you found in part (a). Do you think that is a good idea? Why?

Before doing anything rash, you want to conduct further market research and find that there are actually 600 Instagram Influencers in Evanston who are interested in the gym. Should Workout Wonderland abandon the daily pass now?