Share
Explore BrainMass

Uniform pricing and market power

Wet-n-Wild Indoor Water Park offers family fun year-round in the Northstar state to locals and out-of-state visitors to the nearby Mall of America. The demand for day-passes to the water park for each market segment is independent of the other market segment. The marginal cost of providing service to each visitor is $5 per day. Suppose the daily demand curves for the two market segments are:

Locals - QL=3000-200P or P=15-0.005*QL
Out of towners - QO = 3000-100P or P=30-0.01*QO

(a.) If Wet-n-Wild Indoor Water Park charges one price to all visitors, what is the profit maximizing price? How many day-passes will be sold per day?
(b.) If Wet-n-Wild Indoor Water Park charges one price to locals, what is the profit maximizing price for locals? How many day-passes will be sold per day to locals?
(c.) If Wet-n-Wild Indoor Water Park charges one price to out-of-towners, what is the profit maximizing price for out-of-town guests? How many day-passes will be sold per day to out-of-town guests?
(d.) Compare the prices from uniform pricing to the prices from price discrimination.

Attachments

Solution Summary

This solution clearly compares the prices from uniform pricing to the prices from price discrimination.

$2.19