Question

Read the article below, and answer the following questions.
SoulCycle is now offering an early-bird booking service for customers who want to secure the best seat in advance.
Its so-called "Soul Early" service launched at the beginning of this month.
Rather than wait until noon on a Monday to book classes for the week, exercise junkies can pay an extra $15 to reserve the exact class and bike they want 24 hours earlier. While this is definitely a bonus, it works out to be a pretty hefty fee when classes cost as much as $36 in New York City.
A spokesperson for SoulCycle did not immediately respond to Business Insider's request for comment.
There are ways around this fee, however. Customers who book and take 15 paid rides during one calendar month are eligible for three Soul Early bookings the next month — a strategy SoulCycle uses to ensure its most loyal customers keep coming back frequently.
In a post for New York magazine, writer Josh Barro compared it to fees that airlines might impose to reserve a seat, for example. Barro went on to talk about whether SoulCycle could go "full airline" and start charging different prices per seat in the class, depending on where they are and what the demand for them would be.
Indoor cycling has become one of the most competitive spaces in the fitness market. Until 2012, SoulCycle seemed to be invincible with its cult following of fans, but then Peloton came along. This high-tech fitness company enables users to stream live classes from anywhere, making it possible to get a SoulCycle-style experience without ever leaving your home.
Peloton has achieved rapid growth in recent years, and earlier this month it announced that it had confidentially filed for an IPO. It was previously reported that an IPO deal could value the company at more than $8 billion.

Part 1   

As a percentage, what is the minimum additional cost to reserve a space early for a class in New York City?
(Round your answer to two decimal places.)  ___   %   

Part 2  

Why should this price discrimination work for SoulCycle?

Choose one or more:

A. Customers self-sort into two groups: those willing to pay more to book early and those who are not

.B. It reflects the high cost of doing business in NYC.

C. Once reserved under someone's name, a spot cannot be resold to another SoulCycle customer.

D. It advertises the high desirability of attending SoulCycle classes.

Answer 1

Part 1

Minimum additional cost %

= (Extra charge X Slots - Free slots) / (Base charge X Slots)

= ($15 X 15-3) / ($36 X 15)

=($15 X 12) / ($ 36 X 15)

= $180/$540 = 0.3333 or 33.33%

However, if charges paid are bifurcated between preceeding and current months, minimum additional cost % reduces to 0 as 3 complimentary advance bookings are aboslutely free (numerator = 0). When 0 is divided by any denominator >0, the answer is 0.

Alternatively, in simplistic terms, minimum additional cost = Premium for early booking / Rack Rate

=15/36 = 0.4167 or 41.67%

Part 2

Price discrimination is successful if subject consumers could be segmented on some economic grounds. Therefor option A is correct.

Options B & C are not direct and explicit in the passage and therefore not the correct choices.

Option D is also correct as it creates a sense of scarcity among consumers making the product even more desirable.