Nazar restaurant makes a market analysis to find out that the minimum willingness-to- pay (wtp) for...
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Nazar restaurant makes a market analysis to find out that the minimum willingness-to- pay (wtp) for the lunch is $2.5 and maximum wtp is $12.5. Suppose that the wtp is uniformly distributed between these limits, that there are 100 lunch customers considering to go to the Nazar restaurant and that the cost of the lunch is $5. a) (0.5 pts) The restaurant classifies anybody with wtp more than $8.5 as a high-paying customer. The rest are considered low-paying customers. The restaurant will offer a la cart service to high-paying customers and a lunch buffet to low-paying customers. Let d₁, d₂ denote the demand of high-paying and low-paying customers, obtain the demand functions di(p) and d₂(p) for 2.5 ≤p ≤ 12.5. b) (0.5 pts) If you are told that the demand functions are: d₁(p) = min {50, 125 - 10p} d₂(p) = (75-10p)+ at what level of wtp (i.e., at what value of v) is the market split in to high- and low-paying customers? (Note that this number was v=7 on your slides. Try to use minimum value of demand and demand function to obtain the new value of v.) Then, find the optimal prices p₁* and p₂* to charge for the markets specified. c) (0.5 pts) What is the total profit when Nazar charges p₁ = 9 and p2 = 6 in the markets specified in part b. Nazar restaurant makes a market analysis to find out that the minimum willingness-to- pay (wtp) for the lunch is $2.5 and maximum wtp is $12.5. Suppose that the wtp is uniformly distributed between these limits, that there are 100 lunch customers considering to go to the Nazar restaurant and that the cost of the lunch is $5. a) (0.5 pts) The restaurant classifies anybody with wtp more than $8.5 as a high-paying customer. The rest are considered low-paying customers. The restaurant will offer a la cart service to high-paying customers and a lunch buffet to low-paying customers. Let d₁, d₂ denote the demand of high-paying and low-paying customers, obtain the demand functions di(p) and d₂(p) for 2.5 ≤p ≤ 12.5. b) (0.5 pts) If you are told that the demand functions are: d₁(p) = min {50, 125 - 10p} d₂(p) = (75-10p)+ at what level of wtp (i.e., at what value of v) is the market split in to high- and low-paying customers? (Note that this number was v=7 on your slides. Try to use minimum value of demand and demand function to obtain the new value of v.) Then, find the optimal prices p₁* and p₂* to charge for the markets specified. c) (0.5 pts) What is the total profit when Nazar charges p₁ = 9 and p2 = 6 in the markets specified in part b.
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a The demand function for high paying customers is d p min 50 125 10 p The demand function for l... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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