eco204_HW_19 - University of Toronto, Department of...

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Unformatted text preview: University of Toronto, Department of Economics, ECO 204 20082009 S. Ajaz Hussain ECO 204 20082009 Ajaz Hussain HW 19 Please review Lecture 21, Bundling spreadsheet model and especially the note on mixed bundling prices Question 1 (20072008 Test 4 Question) Ajax Studios has produced two movies "Canada: No Country for Old Economists" and "Who Am I? John Nash vs. John Nash". The table below shows three Chains' willingness to pay (WTP) for the two movies and Ajax's marginal cost of releasing a movie. All numbers are in `000s of dollars per cinema per week. Each chain has 100 multiscreen cinemas: Chain Chain A Chain B Chain C Marginal Cost Canada: No Country for Old Economists 8 14 20 10 Who Am I? John Nash vs. John Nash 20 14 8 10 (a) Find the optimal weekly prices per screen for releasing the movies separately. Show all calculations and keep explanations brief. (b) Find the optimal weekly prices per screen for releasing the movies as a pure bundle. Show all calculations and keep explanations brief. 1 University of Toronto, Department of Economics, ECO 204 20082009 S. Ajaz Hussain (c) Find the optimal weekly prices per screen for releasing the movies as a mixed bundle. Show all calculations and keep explanations brief. Question 2: (Summer 2008 Final Exam Question) The Toronto Classical Music Society is holding two concert series in Fall 2008. The first series presents the works of Berlioz/Tchaikovsky and the second series presents the works of Bartok/Stravinsky. Market research indicates there are four segments of classical music patrons: Romantics, Neoclassical, Tchaikovsky lovers, and Sophisticates. The following table gives the willingnesstopay for a ticket to each series: Patron Segment Romantic Neoclassical Tchaikovsky lover Sophisticate Berlioz/Tchaikovsky Series $40 $20 $45 $5 Bartok/Stravinsky Series $20 $40 $5 $45 The MC for serving each patron is $5. Assume there are 100 patrons in each segment. (a) Are the patron's preferences suited for superior profits through pure bundling? (b) Describe the economic approach for identifying segments and explain how it differs from the marketing approach. (c) Suppose the Society sells tickets for each series individually. What are the optimal prices for the two series? Show all steps and calculations clearly. (d) Suppose the Society sells tickets to both series as a bundle. What is the optimal price for the bundle of Berlioz/Tchaikovsky and Bartok/Stravinsky series? Show all steps and calculations clearly. (e) Suppose the Society can sell tickets individually and as a bundle. What are the optimal mixed bundle prices? Show all steps and calculations clearly. 2 ...
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This note was uploaded on 05/02/2011 for the course ECO 204 taught by Professor Hussein during the Fall '08 term at University of Toronto.

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