What is profit maximizing pricing policy
Course:- Microeconomics
Reference No.:- EM13915402

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The manager of a local movie theater believes that demand for a film depends on when the movie is shown. Early moviegoers who go to the films before 5pm are more sensitive to price than are even-ing moviegoers. With some market research, the manager discovers that the demand curves for day-time (D) and evening (E) moviegoers are QD=100-10PD and QE=140-10PE respectively. The marginal cost of showing a movie is constant and equal to $3 per customer no matter when the movie is shown. This includes the cost of ticketing and cleaning.

a. What is profit maximizing pricing policy if the manager charges the same price for daytime and evening moviegoers? What is attendance in each showing and what is aggregate profit per day?

b.Now suppose the manager adopts a third-degree pricing discrimination scheme, setting a different day and evening price. What are the profit maximizing prices? What is attendance at each ses-sion? Confirm that aggregate attendance is as in part a what is aggregate profit per day?


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