[Question 3]

We consider 3 customers - George, Bob, and Kyle (thereafter A, B and C) - who are representative and whose willingness to pay for the first, second, third, fourth visit to the amusement park within a month are given in the below table. Ignore cost for now.

Visits (Unit) WTP per Customer per Visit

ABC1rst911122nd7893rd6784th456

a. What is the optimal linear price to maximize the amusement park's profits?

b. What is the consumer surplus/money left on the table under the optimal linear pricing?

c. If the amusement park adopts a fixed fee model (i.e., selling a monthly pass), what should the fixed fee be? Hint: think about at what fixed fee price A, B, C will purchase the move pass.

d. What is the consumer surplus/money left on the table under the optimal fixed fee pricing?

e. Compare how the total revenue and consumer surplus changes because of this change in price structure from the linear price to the fixed fee model.