Wet-n-Wild Indoor Water Park offers family fun year-round in the Northstar state to locals and out-of-state visitors. The demand for day passes to the water park for each market segment is independent of the other market segment. The marginal cost of providing service to each visitor is $5 per day. Suppose the daily demand curves for the two market segments are
.(a) If Wet-n-Wild Indoor Water Park charges one price to all visitors, what is the profit maximizing price? How many day passes will be sold per day?(b) If Wet-n-Wild Indoor Water Park charges one price to locals, what is the profit maximizing price for locals? How many day passes will be sold per
day to locals?(c) If Wet-n-Wild Indoor Water Park charges one price to out-of-towners, what is the profit maximizing price for out-of-town guests? How many day passes will be sold per day to out-of-town guests?(d) Compare the prices from uniform pricing to the prices from price discrimination.
What will be an ideal response?
We add the two demand curves to get the market demand curve:
a.
b.
c.
d. Uniform pricing results in a price of $12.50. This price is higher than the price for locals under price discrimination, $10. This price of $12.50 is lower than the price for out-of-town guests under price discrimination, $17.50.
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