College Athletic Department sells both football and basketball tickets to
student fans. Sports fans among the Friends University student body can be classified
into three “types,” with the following reservation prices for tickets:
|
Reservation Prices ($) |
|||
|
Buyer Type |
Number of Students |
Football Tickets |
Basketball Tickets |
|
Football Fans |
10,000 |
100 |
40 |
|
“All Sports” Fans |
2,000 |
75 |
75 |
|
Basketball Fans |
3,000 |
50 |
105 |
If the tickets for football and basketball games are sold separately, find the Athletic Department’s profit maximizing price to charge.
a. Pmax for Football tickets (Price)
b. Pmax for Basketball tickets (Price)
c. What is the maximum profit that can be achieved pricing separately?
If football and basketball tickets are sold as a bundle, find the Athletic Department’s profit maximizing price and the resulting profit.
d. Pmax(Bundle) (Price of the bundle)
e. What is the maximum profit that can be achieved pricing as a bundle?
f. Which of the two strategies should the athletic department choose? (Bundling or Separate)
Solution :
(a) :- Pmax for Football tickets =
$100
This is because if the AD charges $75 to include all fans ; the
revenue will be (75×12,000)= $900,000 which is less than the
revenue. In case tickets are charged $100.
(b) :- Similarly, Pmax for Basketball
tickets = $105
This is also revenue maximizing price for AD in case of basket
ball.
(c) :- Maximum profit = (100×10,000)+(105×3000) =
$1,315,000
(d) :- Price of bundle will be such that the AD
can include all types of fan then it is a price in all groups will
play.
So, Price of bundle = $75
(e) :- Maximum profit with bundle = 75×15000 =
$1,125,000
(f) :- As max profit without bundle is greater
than maximum profit with bundle. The AD must choose Seprate Pricing
Strategy.
College Athletic Department sells both football and basketball tickets to student fans. Sports fans among the...
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