Scenario 14-6
The concert promoters of a heavy-metal band,WeR2Loud,know that there are two types of concert-goers: die-hard fans and casual fans.For a particular WeR2Loud concert,there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket.There are 1,500 seats available at the concert venue.Suppose the cost of putting on the concert is $50,000,which includes the cost of the band,lighting,security,etc.
-Refer to Scenario 14-6.How much profit will the concert promoters earn if they engage in price discrimination?

Question

Quizplus · Accepted Answer

If the concert promoters engage in price discrimination, they can charge the die-hard fans $150 and the casual fans $75 (halfway between $50 and $150). This means they will sell all 1,500 seats and earn ($150 x 1,000) = $150,000 from the die-hard fans and ($75 x 500) = $37,500 from the casual fans, for a total revenue of $187,500. Subtracting the cost of $50,000, the profit will be $137,500.

Scenario 14-6 The Concert Promoters of a Heavy-Metal Band,WeR2Loud,know That There Are