Page 552 - Microeconomics, Fourth Edition

c12capturingsurplus.qxd 7/22/10 1:12 PM Page 526

526 CHAPTER 12 CAPTURING SURPLUS
passengers on a cruise of a given length and P denotes described by P 1 100 0.2Q 1 , where Q 1 is the number
the price per day. The marginal cost of serving a pas- of advance purchase tickets sold at a price of P 1 . The de-
senger of either type is $40 per person per day. mand schedule for tickets by day-of-travel excursions is
Assuming the cruise line can price discriminate, what is represented by P 2 200 0.8Q 2 , where Q 2 is the num-
the profit-maximizing number of passengers of each ber of tickets sold at a price of P 2 .
type? What is the profit-maximizing price for each type a) Suppose the marginal cost of the ferry trip and use of
of passenger? beach is 50 per customer. What prices should the firm
charge for its excursion tickets?
12.24. An airline has 200 seats in the coach portion of
the cabin of an Airbus A340. It is attempting to determine b) If the marginal cost were high enough, the firm would
how many seats it should sell to business travelers and want to sell fewer than 200 tickets. Suppose the marginal
how many to vacation travelers on a flight between cost of the ferry trip and use of beach is 80 per customer.
Chicago and Dubai that departs on Monday morning, What prices should the firm charge for its beach excur-
January 25. It has tentatively decided to sell 150 seats to sion tickets?
business travelers and 50 seats to vacation travelers at 12.27. You are the only European firm selling vacation
$4,000 and $1,000, respectively. It also knows: trips to the North Pole. You know only three customers
a) To sell an additional seat it sells to business travelers, it are in the market. You offer two services, round trip air-
would need to reduce price by $25. To reduce demand by fare and a stay at the Polar Bear Hotel. It costs you 300
business travelers by one seat, it would need to increase euros to host a traveler at the Polar Bear and 300 euros
price by $25. for the airfare. If you do not bundle the services, a cus-
b) To reduce demand by one unit among vacation travel- tomer might buy your airfare but not stay at the hotel. A
ers, it would need to increase price by $5. To sell an ad- customer could also travel to the North Pole in some
ditional seat to vacation travelers, it would need to reduce other way (by private plane), but still stay at the Polar
price by $5. Bear. The customers have the following reservation
prices for these services:
Assuming that the marginal cost of carrying either type
of passenger is zero, is the current allocation of seats
profit maximizing? If not, would you sell more seats to Reservation Prices (in euros)
business travelers or vacation travelers?
Customer Airfare Hotel
12.25. A summer theater has a capacity of 200 seats
for its Saturday evening concerts. The marginal cost of 1 100 800
admitting a spectator is zero up to that capacity. The 2 500 500
theater wants to maximize profits and recognizes that 3 800 100
there are two kinds of customers. It offers discounts to
senior citizens and students, who generally are more a) If you do not bundle the hotel and airfare, what are the
price sensitive than other customers. The demand curve optimal prices P A and P H , and what profits do you earn?
for tickets by seniors and students is described by P 1 b) If you only sell the hotel and airfare in a bundle, what
16 0.04Q 1 , where Q 1 is the number of discount tickets is the optimal price of the bundle P B , and what profits do
sold at a price of P 1 . The demand schedule for tickets by you earn?
customers who do not qualify for a discount is repre- c) If you follow a strategy of mixed bundling, what are
sented by P 2 28 0.1Q 2 , where Q 2 is the number of the optimal prices of the separate hotel, the separate air-
nondiscount tickets sold at a price of P 2 . What are the fare, and the bundle (P A , P H , and P B , respectively) and
two prices that would maximize profit for the Saturday what profits do you earn?
evening concerts?
12.28. You operate the only fast-food restaurant in
12.26. A small island near a major city has a beautiful town, selling burgers and fries. There are only two cus-
beach. The company that owns the island sells day passes tomers, one of whom is on the Atkins diet and the other
for the beach, including travel by ferry to and from the on the Zone diet, whose willingness to pay for each item
beach. Because the beach is small, the company does not is displayed in the following table. For simplicity, assume
want to sell more than 200 excursion tickets per day. The you have zero fixed and marginal costs for each item.
company knows there are two kinds of visitors: those who
are willing to buy tickets a month in advance and those Customers Burger Fries Burger and Fries
who want to buy on the day of the trip. Those willing to
buy in advance are typically more price sensitive. The Atkins dieters $8 $x $(8 x)
demand curve for advance purchase excursion tickets is Zone dieters $5 $3 $8