Suppose there are two types of people going to see two movies: The Dark Knight and...

Suppose there are two types of people going to see two movies: The Dark Knight and Mama Mia, Type A person like Mary is willing to pay $10.00 for Dark Night and $15.00 for Mamma Mia, while Type B person like Jack is willing to pay $18.00 to see The Dark Knight, while $8.00 to see Mamma Mia. Suppose the cost of theatres are zero.
1. If the movie theatres can only sell the tickets individually for each movie, what will be the price they charge for each movie? And what is the total revenue the theatre can collect?
2. If the theatres can sell the two movies as a bundle, what is the bundle price the theatre will charge? Will the theatres be better off by selling the two movies as a bundle? Why?

Solutions

Expert Solution

Pricing can be based on the price that the customer is willing to pay i.e max amount the customer is willing to pay and company generate maximum profit from that price, and above that price company wont be able to sell the ticket.Hence the will be set such that it will maximize company income as well as customer is willing to pay for it . Price structure based on type of customer are

Type	Dark Knight	Mama Mia	Total
A	$10	$15	$25
B	$18	$8	$26

a) If the movie theaters can only sell the movie ticket individually then it will price the movie based on the maximum price tthe customer is will to pay , here maximum price for Dark Knight is $18 and for Mamma Mia $15 , generating total revenue of $ 33 can generate by selling both the movie ticket , or $ 18 from Dark knight and $ 15 per ticket from Mama MIa

b) The Maximum price the Type B is ready to pay for both the movie is $26 as above that customer will not pay for both the movie as Bundle .Yes the theater will better off by selling the two movie as a bundle even though above working is a is more the bundle price but there are changes that the customer will by either of the movie which wil generate either $18 max per ticket or $ 15 max per ticket but in case of bundle both the ticket will be sold generatig revenue as $26 per ticket

ekkarill92 answered 1 year ago

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