6. Examples of price discrimination

Complete the following table by indicating whether or not each scenario is an example of price discrimination.

Hint: To determine whether a scenario is an example of price discrimination, think about whether the market can be segmented into two groups that pay different prices for the same good.

Duque Vergere manages a Do or Die Theater complex called Cinema I, II, III, and IV. Each of the four auditoriums plays a different film; the schedule staggers starting times to avoid the large crowds that would occur if all four movies started at the same time. The theater has a single ticket booth and a cashier who can maintain an average service rate of 280 patrons per hour. Service times are assumed to follow an exponential distribution. Arrivals on a normally active day are Poisson distributed and average 210 per hour. To determine the efficiency of the current ticket operation, Duque Vergere wishes to examine several queue-operating characteristics.
e.) What is the probability that there are more than two people in the system? More than three people? More than four?

According to the Environmental Protection Agency (EPA), the 2018 Toyota Camry L drives an average of 420.5 miles on a full tank of gas. Assume the mileage follows a normal distribution with a standard deviation of 50 miles. Answer the following questions:

17.) Determine the number of miles that the car will travel with 90%, 30%, and 50% probability on a full tank of gas.

18.) Determine the UPPER AND LOWER value(s) for the interval of miles traveled on a full tank of gas around the mean that includes approximately 68% of miles for this car.

19.) Determine the UPPER AND LOWER value(s) for the interval of miles traveled on a full tank of gas around the mean that includes approximately 95% of miles for this car.

20.) Determine the UPPER AND LOWER value(s) for the interval of miles traveled on a full tank of gas around the mean that includes approximately 99.7% of miles for this car.

CASE STUDY /big 4 Consultants has been appointed by a leading group in hotel industry to prepare feasibility report for opening a five-star hotel in Ras al Khaima. The group had been most successful one in the hotel industry and had always kept its eyes open for new opportunities.

In view of the very fast industrial growth in the city of Ras al Khaima, the city had attracted the attention of the group. It is historically known as Julfar, is one of the seven emirates that make up the United Arab Emirates (UAE). Its name could be taken to mean "headland of the small huts", which can be attributed to the indigenous buildings that existed along the coast. The Emirate is in the northern part of the UAE, bordering Oman’s exclave of Musandum. RAK, apart from being a developing city, has added advantage of pleasant weather and several places of tourist attraction in the neighborhood. Moreover, the closeness to Dubai and Abudhabi, a city of international stature, has made it very easily accessible to international tourists.

For this Consultancy, this was the first time in this area that an assignment concerning hotel industry had been received. They, however, soon realized that the assignment was not as simple as it appeared to be in the first place. The feasibility of such a hotel would depend essentially on two factors. Businessman visiting the city for work would constitute one segment of the market, while tourists would constitute the other. Further, the tourists could be from UAE or foreigners. The success of such a hotel would also depend upon the relative attraction of other tourist centres in the vicinity. Further, it was necessary to estimate fluctuations in demand for hotel accommodation so that attractive discounts could be offered during the off-season for business conferences, executive developmental programmes, etc.

The consultants realized that they would have to undertake a market research on a national scale to assess the tourist potential of the city. They would also have to survey the foreign tourists to estimate one of the most important segments of the market. They wondered whether such a survey will have to extend over a period of one full year to completely take into account the seasonal variations in tourists’ traffic. Moreover, they were undecided about the manner in which survey should be conducted. The company also feared that in absence of an accurate definition of the problem, they may land up surveying the complete tourist market in UAE rather than studying feasibility of a hotel in RAK.

Thus, the problem appeared well defined and that they were concerned as the preliminary report explaining methodology of the research and the questionnaires to be used to be submitted to the client along with the estimate of expenses within one month.

QUESTIONS

1. Apply your ideas in defining the problem of assessing feasibility of hotel in RAK so as

    to help designing the survey.

2. It is important to plan a survey for collecting information on expected demand for

    hotel space. Illustrate.

3. Being the coordinator of this research at Big 4 Consultants, explain various steps you

    would suggest to your research team in preparing the report to the Hotel management.

Case 2 Running Free Dog owners constitute a large target market. Most members share something in common: the desire to let the pet run free and unfettered. If other friendly dogs are nearby and want to play—all the better. The Running Free Dog Park was created to meet this need for owners in the greater Atlanta area. Out-of-home advertising can be the critical component of an IMC program and, in some cases, the primary medium. To help launch the new venture, a local advertising agency created a feeling of expectancy and mystery with a “Running Free Dog Park” campaign. The first billboard displayed a dog tied up with a leash; however, it was only a partial picture. The unfinished nature of the image helps capture interest. Next, the same dog is shown with an unfastened leash and the word “running” appears beneath the pet. In the final billboard, the dog appears unfetters, the leash is gone, and the message “Running Free Dog Park” appears. The billboard displays the services offered, the website address of the park, and the location of the park. In addition to billboards, street kiosks and bus wraps were used to get the message out. Three unleashed dogs in the grass of a park. A dog park can be marketed as a place for pets to run free. The early results of the campaign were positive. Many dog owners became aware of the new park. What followed represented common challenges in marketing communications: sustaining initial interest, moving consumers to action, and building repeat business. In this next phase, dog owners needed to be encouraged to try the facility. They should be led to believe that the price of entry was a value. Then, over time, they can be enticed to make return visits and to offer word-of-mouth referrals to other pet owners. Only if these objectives can be attained will the initial success of the Running Free campaign become validated. 7-48.Define the marketing goals for the second phase of the Running Free Dog Park promotional efforts.

7-49.How would the three-exposure hypothesis or recency theory apply to this advertising program in its initial stages? What about the second campaign after consumers are aware of the dog park?

7-50.Which traditional advertising media should the marketing team use for the second campaign? Discuss the pros and cons of each in terms of the Running Free Dog Park campaign and the desire to stimulate trial usage.

7-51.How could social media and nontraditional media be used to supplement a traditional media campaign in this circumstance?

7-52.Design a newspaper ad and an out-of-home ad that will be placed at Little League baseball parks in the area. Explain why having these two ads in different media is better than having two ads within the same media.

Descriptive statistics: What do all of those numbers mean in terms of the problem. Organizing and summarizing data is called descriptive statistics. Two ways to summarize data are by graphing and by using numbers (for example, finding an average). A statistical graph is a tool that helps you learn about the shape or distribution of a sample or a population. Our data is examining the distance (miles) between twenty retail stores, and a large distribution center The Mean: (84.05 miles) shows the arithmetic mean of the sample data. Standard E: (7.71822 miles) shows the standard error of the data set, which is the difference between the predicted value and the actual value. Median: (86.5 miles) shows the middle value in the data set, which is the value that separates the largest half of the values from the smallest half of the values Mode: (96 miles) shows the most common value in the data set. Standard [: (34.51693 miles) shows the sample standard deviation measure for the data set. Sample Va: (1191.418 miles) shows the sample variance for the data set, the squared standard deviation. Kurtosis: (-0.48156 miles) shows the kurtosis of the distribution. Skewness: (0.210738 miles) shows the skewness of the data set’s distribution. Range: (121 miles) shows the difference between the largest and smallest values in the data set. Minimum: ( 29 miles) shows the smallest value in the data set. Maximum: (150 miles) shows the largest value in the data set. Sum (1681 miles) adds all the values in the data set together to calculate the sum. Count (20 miles) counts the number of values in a data set.

Among the fun details in the article are the following estimates of price elasticity of demand:

A. Explain why the different estimates of price elasticity of demand for cigarettes regarding youth as opposed to all smokers in general either does or doesn’t seem to make sense.

B. Assuming that Japan is a wealthier country than either Bangladesh or China, why would demand for rice be less elastic in Japan than in either of the two other countries?

C. Why is demand for Coke and Mountain Dew more elastic than the demand for soft drinks in general?

D. If the price elasticity of supply for cannabis is 0.4, who would bear most of the burden of a cannabis tax, consumers or suppliers? Explain why.

Fund A which is an active long-only fund and Fund B which is an absolute return fund. They are both restricted to investing in the US equity market, but have the flexibility to buy individual securities and use derivatives. The benchmark market return for the period was 10% and the risk-free rate was 2%. The performance data for the two funds over the same period is shown in the table below.

1. Briefly explain the term ‘absolute return’ strategy.
2. Calculate the information ratio for Fund A and discuss whether, on this basis, it has generated a good performance.
3. Which of the fund managers appears to be exhibiting better stock picking skills?
4. Comment on the tracking error of 7.2% in Fund A. Why is there no tracking error number given for Fund B?
5. The manager of Fund A is a manager with a growth style of investing. Explain the philosophy behind growth investing.

Use the Empirical Rule. The mean speed of a sample of vehicles along a stretch of highway is 71 miles per​ hour, with a standard deviation of 4 miles per hour. Estimate the percent of vehicles whose speeds are between 63 miles per hour and 79 miles per hour.​ (Assume the data set has a​ bell-shaped distribution.) Approximately what ​% of vehicles travel between 63 miles per hour and 79 miles per hour.

The distance a student lives (in miles) from their classroom is approximately normally distributed with a mean of 5 miles and a standard deviation of 1.5 miles. Use the normal table to find the probabilities.

a) How far away do the closest 15% of students live?

b) What is the probability that a student will live less than 7 miles away?

c) What is the probability that a student will live further away than 3 miles

or less than 7 miles away?