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Unformatted text preview: o Admission Fee = $3 Variable Fee o Blank DVDs = variable fee (to keep recording, you keep buying) o Variable Fee = $2/ride Tradeoff between Entry Fee and Variable Fee If variable fee is high, CS is smaller, less CS to take as entry fee If variable fee is low, CS is bigger, able to get higher entry fee Consumer Heterogeneity Example: Demand for printer cartridges o Person A loves photography o Person B so-so Better to have o Low entry fee (get both people into the market) o High variable price (cartridges) Why is popcorn so damned expensive in theaters? Movie ticker (entry fee) Popcorn (variable cost) Consumer Heterogeneity o Some desire both o Some only want to see the movie Ideal strategy o Movie relatively cheap o Popcorn relatively expensive...
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