Question

In: Economics

Disney offers both hotel rooms and entrance to their theme parks at their resorts.

Disney offers both hotel rooms and entrance to their theme parks at their resorts. Consider four different market segments with willingness to pay for rooms and market shares shown in the table below. Assume a total market size of 5,000 individuals per day.

Segment Amusement

Park Lover, Luxury Lover, Conference Devotee, Disney Devotee Room, $200 $300 $325 $50 Theme Park $150 $50 $5 $200 Market Share 20% 10% 20% 50%
a) Scenario A: Consider a Disney price menu with the Hotel Room at $300 and Theme Park Entrance at $150. Complete the chart by answering the following questions. i. Calculate the consumer surplus for each segment with each offering. (4 points) ii. Calculate the revenue earned from each offering and market segment. (4 points)
Consumer Surplus Room Theme Park Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee Revenue Theme Park Room Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee

b) Scenario B: Consider a Disney price menu of Hotel Room at $200 and Theme Park Entrance at $150. Complete the chart by answering the following questions. i. Calculate the consumer surplus for each segment with each offering. (4 points) ii. Calculate the revenue earned from each offering and market segment. (4 points) Consumer Surplus Room Theme Park Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee Revenue Theme Park Room Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee
c) Scenario C: Consider a Disney price menu of Hotel Room at $325 and Theme Park Entrance at $200, and Hotel + Theme Park Bundle for $350. Complete the chart by answering the following questions. i. Calculate the consumer surplus for each segment with each offering. (6 points) ii. Calculate the revenue earned from each offering and market segment. (6 points)
Consumer Surplus Theme Park Room Room + Theme Park Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee Revenue Room Theme Park Room + Theme Park Amusement Park Lover Luxury Lover Conference Devotee Disney Devotee

d) What are the optimal prices of the Hotel Rooms and Theme Park Entrance in the absence of bundling? (3 points)

e) Compare the revenue obtained in part (c)(ii) with the revenue obtained in part (d)? (2 points)

f) Explain the intuition about why bundling increases the overall revenue earned? (3 points)

I know how to do part a and b but not sure for part c, d, and e

Expert Solution

a1).Consumer surplus:

a2). Revenue earned:

b1).

consumer surplus:

b2).

Revenue earned:

Rahul Sunny answered 2 years ago

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