Reference no: EM133280154
You have been hired as a consultant by DaCast, an online pay-per view platform, where customers pay to access a specific piece of content. DaCast asks you to write a report on its pricing strategy of its new online movie "Rings of the Dragon".
DaCast is the sole owner of the property rights of the movie; this includes the movie, cast interviews, any other movie extras. The DaCast platform allows the movie to be offered in different streaming quality/speed, with or without ads.
You can assume DaCast is a monopolist in the relevant market. The requirements of the report are given below, your report should address each specific question in turn.
1. Suppose DaCast knows the exact willingness to pay for the "Rings of the Dragon" movie for each customer. Outline the pricing strategy you recommend. What conditions are required for this pricing strategy to be implementable? Make sure you provide clear economic reasoning for your answer.
2. Now assume there are just two types of customers: high fantasy lovers (HFL) and standard customers. The two types of consumers differ in their valuation of the movie. Assume, for this question, the HFL are the high-value customers, and standard customers have relatively low values from the movie. While DaCast knows the willingness to pay for each type of consumer, it cannot observe the type of any given customer (that is, DaCast does not know whether a particular potential audience is a HFL or standard customer). What pricing strategy would you now recommend? Clearly explain your strategy. What conditions are required for your recommendation to be implemented?