Question

The owner of the theater in Exercise 1 would like to experiment with segmenting the market into people who have a willingness-to-pay >$20(evening session) and those who have a willingness-to-pay less than or equal to $20(matinee session). The owner still pays $10 in royalties per person who views the film. Find the price per ticket for the two market segments that maximize contribution. How many people would the owner of the theater have in each of the sessions

Answer 1

Willingness to pay is $20.00, so the ticket price should be near to $25 for evening session.

The willingness to pay for the matinee sessions is less than $20 so the ticket price should be $18. This will attract more customers and the total revenue for the theatre will be high.

The maximum capacity for the theatre is 200 person per session. The theatre wishes to run on full capacity.

Step-by-step explanation:

Theatre owner should plan its ticket price based on customers willingness to pay. When customers are willing to pay for good or service this means customer have value for that service. They will find value for money. The customer are willing to pay higher for evening sessions and lower for matinee sessions. The price for evening session should be set higher than matinee session.