A new entrant, Bargain Airways, cuts air fares between Eastwich and Westwich by 20 percent. Biggie Airlines, which has been operating on this route, responds by cutting fares by 35 percent. What does Biggie hope to achieve?
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A new entrant, Bargain Airways, cuts air fares between Eastwich and Westwich by 20 percent. Biggie Airlines, which has been operating on this route, responds by cutting fares by 35 percent. What does Biggie hope to achieve?
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- The airline’s use of demand pricing results in passengers paying different prices for essentially the same seat. What is the benefit of this practice to the airline and to the passengers? What is the drawback to the airline and the passengers? Do you think this practice should be continued? If not, what would be the best alternative?From the airlines' perspective, amenities competition is preferable to price competition because revenues are not adversely affected and it is easier to determine the strategies of one's competitors. True or FalseWhat type of pricing strategies are airlines using? Is it ethical for airlines to charge baggage fees?
- LalaFast 21 is a major carrier based in the Philippines and has made a strategy of cutting fares drastically on certain routes with large effects on traffic in those markets. For example, on the Baguio-Cubao route the entry of LalaFast into the market caused average fares to fall by 48 per cent and increased market revenue from P21,327,008 to P47,064,782 annually. On the Tuguegarao-Caloocan route, however, the average fare cut in the market when LalaFaST entered was 70 per cent and market revenue fell from an annual P66,201,553 to P33,101,514.Questions1. Calculate the PEDs for the Baguio-Cubao route and Tuguegarao-Caloocan route.2. Explain why the above market elasticities might not apply specifically to Lalafast 21.3. If LalaFast 21 does experience a highly elastic demand on the Baguio-Cubao route, what is the profit implication of this?4. Explain why the fare reduction on the Tuguegarao-Caloocan route a profitable strategy for LalaFast may still be.How does the Merger of two airlines affect supply and demand in the airline industry? Explain in details Thank youA city has two newspapers. Demand for either paper depends on its own price and the price of its rival. Demand functions for papers A and B respectively, measured in tens of thousands of subscriptions, are 21-2Pa + Pb and 21 + Pa-2Pb The marginal cost of printing and distributing an extra paper just equals the extra advertising revenue one gets from another reader, so each paper treats marginal costs as zero. Each paper maximizes its revenue assuming that the other's price is independent of its own choice of price. If the papers enter a joint operating agreement where they set prices to maximize total revenue, by how much will newspaper prices rise? (a) 3 (b) 2 (c) 0 (d) 3.5 (e) 2.5
- The Broadway show Hamilton is coming to perform for one night. There are two types of consumers interested in the show- current students and rich alumni. The demand curve for the student market is Q= 300-0.4P with marginal revenue MR= 750-5Q. The demand curve for the alumni market segment is Q=600-0.1P with marginal revenue MR=6000-20Q. If the two types of consumers are in the market, the MR=1800-4Q. The cost function is C(Q)=200Q and the marginal cost of serving either customer is MC=200. 2. How much total consumer surplus is generated?The Broadway show Hamilton is coming to perform for one night. There are two types of consumers interested in the show- current students and rich alumni. The demand curve for the student market is Q= 300-0.4P with marginal revenue MR= 750-5Q. The demand curve for the alumni market segment is Q=600-0.1P with marginal revenue MR=6000-20Q. If the two types of consumers are in the market, the MR=1800-4Q. The cost function is C(Q)=200Q and the marginal cost of serving either customer is MC=200. 3. what is the profit-maximizing price charged to students? what is the profit-maximizing price charged to alumni?The Broadway show Hamilton is coming to perform for one night. There are two types of consumers interested in the show- current students and rich alumni. The demand curve for the student market is Q= 300-0.4P with marginal revenue MR= 750-5Q. The demand curve for the alumni market segment is Q=600-0.1P with marginal revenue MR=6000-20Q. If the two types of consumers are in the market, the MR=1800-4Q. The cost function is C(Q)=200Q and the marginal cost of serving either customer is MC=200. 1. Assume the show knows there are different types of consumers but can not tell the difference so they must sell tickets at a single price. At what price do all consumers enter the market? What profit-maximizing price and quantity are the tickets sold at?
- If your marketing department estimates that the semiannual demand for the highlander is q=150,000. - 1.5 P, what price should you charge in order to maximize revenues from the sales of highlanderA profit-maximizing ten-pin bowing club segments its market by practicing third-degree price discrimination. It charges juniors $4 per game based on their price elasticity of demand of –2.0. Its adult customers have a price elasticity of demand of –1.4. The marginal cost per game does not vary by the customer’s age. What price does the ten-pin bowling club charge adult customers?Suppose an airline sells air tickets to two types of customer - business travelers and vacation travelers. Their estimated demand elasticities are -2.5 and -4.0 respectively. Suppose the marginal cost is constant at $240, and the services provided to the two types of customer are similar a. Based on the given information, explain with TWO practical reasons whether the airline should charge a higher price on business travelers or vocational travelers. Explain without calculation. b. Calculate the fares the airline should charge on the air tickets sold to the respective types of customers. Show your calculations. c. Suggest TWO practical methods the airline can differentiate the two types of customers and charge them the corresponding fares. Explain briefly