Question

Suppose the typical Buffalo Bills fan has the following demand curve for Bills football games: P = 120 – 10G where G is the number of games the fans attends. Suppose the Bills have the chance to offer a season ticket that is good for all eight home games. What price should they charge?

Answer 1

Answer:

(a) If the Bills want to sell tickets to all 8 games by selling eight individual tickets, they have to set the price P = 120 − 10(8) = 120 − 80 = $40. This yields revenue of $40(8) = $320 from each fan.

(b) If the Bills practice second degree price discrimination, they can effectively charge

P = 120 − 10(1) = 120 − 10 = $110 for single games,

P = 110 + 100 + 90 + 80 = $380 = $95/ticket for a 4-game package, and

P = 110 + 100 + 90 + 80 + 70 + 60 + 50 +40 = $600 = $75/ticket for an 8-game package.