Question

Question 4 The Kennedy Center is launching a membership campaign to raise funds. The 100 prospective members are of two types: 60% are ordinary, 40% are generous. Memberships can be of two types: sustainer, with ordinary benefits, and golden circle, with more generous benefits. The cost of providing benefits to each type of members, and the members' willingness to pay are summarized in the following table (measured in dollars): Cost Sustainer Membership Type Golden Circle Willingness to Pay Ordinary Generous 280 450 350 600 2 00 300 a. How much does the Kennedy Center collects by selling golden circle memberships to generous donors and sustainer memberships to ordinary donors? b. Assume not that the Kennedy Center cannot identify the customers' types. What happens if they follow the same pricing policy as of point a.?

Answer 1

A) The Kennedy center will charge 600 for Golden circle from generous and 280 from ordinary for sustainer.

TR=60*280+40*600=40,800

B) The ordinary will buy still sustainer but generous people will buy also sustainer as net benefit is zero with golden circle while net benefit is 170.

TR=100*280=28,000

C)The kenndy should charge 280 for sustainer and 430(600-170=430) for Golden circle to separate type of prospective members.

D) selling sustainer more than 280 and selling Golden circle at 350.

So both type will buy golden circe.

TR=350*100=35,000