price discriminate, A monopolist selling several dierent products can sometimes "price

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price discriminate

A monopolist selling several dierent products can sometimes "price discriminate" by bundling her products together. Here's an example. Suppose the U of C is planning to oer a series of two concerts. The rst program in the series consists of music by Chopin; the second, music by Stravinsky. There are four types of patrons with the following reservation prices (willingness to pay) for the concerts:

Romantic Type: $40 for Chopin, $20 for Stravinsky Modern Type $20 for Chopin $40 for Stravinsky

Chopin Lover $45 for Chopin $5 for Stravinsky

Stravinsky Lover $5 for Chopin $45 for Stravinsky

Suppose for simplicity that there is only one individual of each type and everyone can be accom-

modated at either performance. Also suppose the U of C does not know any individual's given

type.

(a) Suppose rst that separate tickets are oered for the two concerts. What is the prot

maximizing price per ticket?

(b) Suppose that only a single ticket for the series is oered. What is the prot maximizing

price for a series ticket? Have prots increased? What is the intuition for this result?

(c) Can you nd a more protable alternative?

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