Price discrimination strategy of united airlines

Reference no: EM1311203

Price Discrimination: Suppose that United Airlines knows that it faces the following demand equations and corresponding marginal revenue equations for its (one-way) SFO to Las Vegas route:

Friday Departure: P = 320-2Q (Demand)

MR = 320-4Q (Marginal Revenue)

Tuesday Departure: P = 200-Q (Demand)

MR = 200-2Q (Marginal Revenue)

Marginal Cost is a constant $40 per passenger.

a) Find the profit-maximizing quantity of passengers for Friday departures and Tuesday departures. Find the profit-maximizing price for each.

b) Calculate total revenue received on Friday flights and Tuesday flights.

c) Draw two separate graphs for Friday demand and Tuesday demand. In your graph include a marginal revenue curve and marginal cost curve. Show the profit maximizing price and output for each graph.

d) What if United Airlines charged $150 per passenger everyday of the week, would this maximize profits? Why or why not?

Reference no: EM1311203

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