Question

In: Economics

You have three tickets to a Celtics game on a night that you are going to...

You have three tickets to a Celtics game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only four possible buyers of a Celtics ticket. The table below lists the respective reservation prices of these four possible buyers: Customer Reservation Price 1 $25 2 $35 3 $50 4 $60 How much revenue can you generate if you charge a single price of $25 for the three tickets?

a) How much revenue can you generate if you charge a single price of $35 for the three tickets?

b). How much revenue can you generate if you charge a single price of $50 for the three tickets?

c) How much revenue can you generate if you charge a single price of $60 for the three tickets?

d) Which of the prices fetches you the highest revenue?

e) Next, you think about inviting bids using an English auction to sell your tickets. How much revenue can you generate using the English auction mechanism from the sale of the first ticket?

f) How much revenue can you generate using the English auction mechanism from the sale of the second ticket?

g) How much revenue can you generate using the English auction mechanism from the sale of the third ticket?

h) How much total revenue can you generate using the English auction mechanism?

i) Which pricing strategy gives you higher revenue - English Auction or charging a single price?

Solutions

Expert Solution

Question

(a)

If price per ticket is $25 then all four possible buyers would be interested in buying the ticket as their reservation price is either equal or greater than the price of the ticket.

So, all three tickets would be sold.

Calculate the total revenue -

Total revenue = Price per ticket * Number of tickets = $25 * 3 = $75

The total revenue generated when single price of $25 per ticket is charged is $75.

(b)

If price per ticket is $35 then buyer 2, 3, and 4 would be interested in buying the ticket as their reservation price is either equal or greater than the price of the ticket.

So, all three tickets would be sold.

Calculate the total revenue -

Total revenue = Price per ticket * Number of tickets = $35 * 3 = $105

The total revenue generated when single price of $35 per ticket is charged is $105.

(c)

If price per ticket is $50 then buyer 3 and 4 would be interested in buying the ticket as their reservation price is either equal or greater than the price of the ticket.

So, only two tickets would be sold.

Calculate the total revenue -

Total revenue = Price per ticket * Number of tickets = $50 * 2 = $100

The total revenue generated when single price of $50 per ticket is charged is $100.

(d)

If price per ticket is $60 then buyer 4 would be interested in buying the ticket his or her reservation price is either equal to the price of the ticket.

So, only one ticket would be sold.

Calculate the total revenue -

Total revenue = Price per ticket * Number of tickets = $60 * 1 = $60

The total revenue generated when single price of $60 per ticket is charged is $60.

(e)

The single price of $35 per ticket fetches the highest revenue.


Related Solutions

Suppose you have four extra tickets to a football game and you are trying to determine...
Suppose you have four extra tickets to a football game and you are trying to determine which of your five closest friends to take with you: Mark, Samuel, Elizabeth, James, and Mary. You decided to randomly choose four of them to attend the game with you. What is the probability that you will choose at least one friend whose name starts with the letter M? 0 2/5 4/5 1 2
Suppose we are going to play a game. You have to choose to toss a coin...
Suppose we are going to play a game. You have to choose to toss a coin either 40 times or 400 times (pretend you have a lot of time on your hands!). You win the game if the percentage of heads is between 52.5% and 57.5%.
Jerry and a group of friends have decided to set up an online game night for...
Jerry and a group of friends have decided to set up an online game night for this Wednesday. Most of the games they will play involve a standard deck of playing cards (52 card deck). As such, Jerry hopes to use what he's learning in statistics class to gain an upper hand. **For reference, a standard deck of playing cards consists of 52 cards. Each card is one of the 4 suits: spade, heart, diamond, or club. Each suit contains...
Hannah coaches a youth soccer team . Tomorrow night, they have a game. Suppose there is...
Hannah coaches a youth soccer team . Tomorrow night, they have a game. Suppose there is a 43% chance that her team will lose. Regardless of whether her team loses, Hannah figures there is a 58% chance that a parent will complain about something to her after the game. From previous seasons, Hannah knows that the probability that her team loses and a parent complains is 35%.  (Hint: Organize and label the given information first before starting. Write out the probability...
53. It is a Friday night, and you have an option between three distinct activities: 1....
53. It is a Friday night, and you have an option between three distinct activities: 1. Enjoying a long walk with your dog. 2. Re-watching Game of Thrones. 3. Working out with your bros until you get pumped. You hate Game of Thrones, but enjoy the other two activities; working out is your favourite. What is your opportunity cost of watching Game of Thrones? (A) The pleasure from watching Game of Thrones. (B) The pleasure from walking your dog. (C)...
Suppose you are playing a dice game and you have three options to find a score....
Suppose you are playing a dice game and you have three options to find a score. The options are: A. Rolling an 11-sided die and using the outcome as your score.* B. Rolling two 4-sided dice, adding 1 to their sum, and using that number as your score. C. Rolling two 4-sided dice, doubling the result of the first die and adding it to the result of the second, subtracting 1 from this result, and using this number as your...
Suppose you are playing a dice game and you have three options to find a score....
Suppose you are playing a dice game and you have three options to find a score. The options are: Rolling an 11-sided die and using the outcome as your score.* Rolling two 4-sided dice, adding 1 to their sum, and using that number as your score. Rolling two 4-sided dice, doubling the result of the first die and adding it to the result of the second, subtracting 1from this result, and using this number as your score. Assume that each...
Lilly is supposed to brush her teeth every night before going to bed. One night, her...
Lilly is supposed to brush her teeth every night before going to bed. One night, her dad asks herwhether she’s already brushed her teeth and she says “yes”. Lilly is usually truthful but to checkher dad touches her toothbrush and finds it dry.It is possible think about this story as a hypothesis test conducted by Lilly’s dad. Please carefullydescribe the following in complete english sentences in the context of this problem(a) The null hypothesis and the alternative hypothesis.(b) A type...
Let’s suppose that you are going to play the lottery game Powerball. To play, you pick...
Let’s suppose that you are going to play the lottery game Powerball. To play, you pick five different numbers from 1 through 69 plus one Powerball number from 1 through 26. Which is a more likely combination of winning numbers: 1, 2, 3, 4, 5, 6 or 7, 21, 25, 32, 40, 56? Explain your answer. For a $500,000,000 jackpot, which of the two combinations would likely be more lucrative for you if it were to win? In other words,...
Fly By Night Games Company has decided to hire you to program their new board game...
Fly By Night Games Company has decided to hire you to program their new board game simulator for the game “Chutes & Ladders”. The board has squares which are numbered from 1 to 100 and players have counters which start on the theorectical square 0. The players take turns at spinning a spinner with the numbers 1 to 6 on it, and each moves his or her counter forward the number of squares corresponding to the number on the spinner....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT