5.8 EXERCISES

We return to the Stanford Stadium pricing problem in Section 5.4, assuming a

capacity of 60,000 seats and the demand curves for students and for the general

public as given in Equations 5.1 and 5.2. Assume that 5% of the general public will

masquerade as students (perhaps using borrowed ID cards] in order to save money.

Assuming that Stanford knows that, what are the optimal prices for student tickets

and general public tickets it should set in this case? What is the total revenue, and

how does it compare to the case without cannibalization? What does this say about

the amount that Stanford would be willing to pay for such devices as photo ID cards

inorder to eliminate cannibalization?