Question

Suppose that a golf club is designing a two-part tariff pricing mechanism in order to increase profits. Suppose there are two types of golfers, mad-golfers and normal-golfers. The mad-golfers have demand P = 200 – 2Q and normal-golfers have demand P = 160 – 2Q, where P is price per round of golf and Q is number of rounds consumed per year. Assume there are equal numbers of each golfer and that the marginal (and average) cost of a round of golf is 20. Denote the annual membership fee as T and the price per round of golf as P. Which of the following pricing structures realises the most profit for the club?

a.T = 1800, P = 20.

b.T = 1400, P = 20.

c.T = 3600, P = 40.

d.T = 6400, P = 40.

e.T = 4900, P = 60.

Answer 1

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