ps10 - tickets? c) Now suppose the airline still cannot...

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UNIVERSITY OF WISCONSIN Economics 101 – Fall 2005 Wei Zhang Problem Set 10 (due Dec. 5 in class) Price Discrimination (cont'd) 1. Suppose an airline flies the route of Boston to Hawaii at no cost and the airline faces two types of passengers: business and leisure (50/50 percent). Each traveler will buy at most one ticket from the airline and their reservation price (willingness to pay) for unrestricted tickets and restricted tickets are as follows: Type of tickets Unrestricted Restricted Business $1000 $600 Leisure $400 $350 a) If the airline offers both types of tickets and can distinguish the two types of travelers and perfectly price discriminate, what pricing scheme will the firm use? b) Now suppose the airline cannot distinguish the two type of travelers. If the airline only offers unrestricted tickets, at what price should the firm sell the tickets at? What if the airline only offers restricted
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Unformatted text preview: tickets? c) Now suppose the airline still cannot distinguish the two type of travelers but offers both type of tickets, at what prices should the firm sell the two types of tickets? Game Theory 1: A Simple 2x2 Game 2. a. Find all the Nash Equilibria of the following game. Remember the standard payoff notation: (Jane, Dick). D Left Right Jane Up (2 , 0) (4 , 2) Down (4, 3) (3 , 0) b. Does Jane have a dominant strategy? Does Dick? Explain how you know this. Game Theory: A 3x3 Game 3. a. Find all Nash equilibria of the following game. Jerry Tom Left Center Right Top 1,0 3,6 2,4 Middle 2,0 2,7 3,5 Bottom 1,2 6,3 5,0 b. Is there any strategy that Tom should never play (This is called a dominated strategy)? If so, what is it? c. Does Tom have a dominant strategy? Does Jerry have a dominant strategy? Explain....
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ps10 - tickets? c) Now suppose the airline still cannot...

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