Managerial Economics 2nd Edition by William Boyes

Exercise 4

Analytics
Who are the best customers for credit card companies? Do the companies want the customer with terrific debt and credit habits who pay the balance every month or the customer who always has a balance and never pays it off? Who are the best customers for airlines, the business traveler who uses airlines Monday through Friday and often can't make advanced plans or the tourist traveler who plans a long time in advance of the trip and has the flexibility to travel any day? The objective of a firm is to find that price and quantity combination that maximizes profit. When the firm has different niches or different sets of customers, it is typically better to treat each differently than to have a single uniform price. When different customers pay different prices for the same good or service, this is called personalized pricing or price discrimination. Suppose the economics division of a major airline company estimates that the demand functions for business and tourist travelers from Los Angeles to Beijing are as follows.

What does this information provide?