Sedgefield Resort offers vacation packages to direct resort book and travel search engine customers. Annual demand functions for single night...
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Question

Sedgefield Resort offers vacation packages to direct resort book and travel search engine

customers. Annual demand functions for single night bookings, Q, are as follows:

 Direct Book


 PR = $50 - $0.0004QR



 Travel Search Engine


 PS = $35 - $0.00075QS



Marginal costs per bookings are $20 per night. Because MC is constant, MC=AVC.


A. It is easy for the company to segment the market and price discriminate between the

Direct Resort Book and Travel Search Engine customers. Calculate the profit maximizing price, output, and total profit contribution levels.


B. What are the price elasticities for each group of customers calculated in part A? Are

these elasticities consistent with what you would expect given your answers in part A?

Explain. 

Answered by Expert Tutors

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Subject: Business, Economics
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