Question: Wet-n-Wild Indoor Water Park offers family fun year-round in the Northstar state to locals and out-of-state visitors to the nearby Mall of America. 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:

Locals: Q _L =3000-200P or P = 15-0.005Q _L

Out-of - town : Q _O =3000-100P or P = 30-0.01Q _O

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. Explain how the company would implement the price discrimination.

Price: $2.99

Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document