Question

As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters.

On weekends, the inverse demand function is ? = 20 − 0.001? ;

On weekdays, it is ? = 15 − 0.002? .

You acquire legal rights from movie producers to show their films at a fixed cost of $25,000 per movie, plus a $2.50 “royalty” for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once).

Devise a pricing strategy for the moviegoers to maximize your firm's profits.

Answer 1

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