Managerial Economics Case Report 國貿二 黃德葶 102207332 經濟二 林尚賢 102502028...
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Transcript of Managerial Economics Case Report 國貿二 黃德葶 102207332 經濟二 林尚賢 102502028...
Managerial Economics Case Report
國貿二 黃德葶 102207332經濟二 林尚賢 102502028財政三 鄭雅文 100207228
NCCU Swimming Pool
Outline
1.Introduction of NCCU Swimming Pool2.Pricing Policy1)Package Deal2)Direct Segment Discrimination
3.Externalities4.Problems & Solutions
Introduction of NCCU Swimming Pool
NCCU Swimming Pool
Opening Hours
Monday to
Saturday
06:00 to 22:00 (No Entry after 21:30)
Sunday 06:00 to 18:00 (No Entry after 17:30)
Holidays
Closed
Specifications
• 50 Meters, 8 Lanes• Water Depth : Depth of 130cm at Both Ends Depth of 150cm in the Middle
Pricing Policy
Economics Analysis
Package Deal one time admission, monthly ticket, annual ticket……
Direct Price Discrimination discriminate among segments of buyers
Package Deal
• Charge buyer just a little less than her/his total benefit• Leave buyer with almost zero surplus
When a student wants to go swimming …..
Though I do not swim well, I want to cool down in the
pool in such a hot day.
I am not busy in the first
week of school, so why
not go swimming
Oh, how I love swimming! It can not only make me healthy but also help me lose
some weight. I want to go swimming every day.
one time admissio
n
monthly ticket
annual ticket
Admission
• Fees for NCCU students
per time monthly semiannually annually
$ 40 $ 250 $ 1,000 $ 1,600
XXX
• Fare for Students: $ 40/timeSuppose that the demand curve of student A is as the right
• D=MB=65-1.25q 、 MC=40when MB=MC, p*=40 、 q*=20-Student A is willing to swim 20 times semiannually
P
Q (time/semi-year)
40
20
MC
D=MB
65Willingness
to Pay$1,050
Payment$800
Buyer Surplus$250
Benefit
Ticket per Time
NCCU Earning :$40*20=$800
Ticket/
Semiannually
NCCU Earning :$1,000
40
20
MC
D=MB
65
40
20
MC
D=MB
65
Benefit
• Earning/semiannual($1,000)> Earning/time ($800)
• The difference between these two is the buyer
surplus taken away by the supplier
• Package Deal leave buyer with almost zero surplus
to increase the total profit
Ticket/
Semiannually
NCCU Earning :$1,000
40
20
MC
D=MB
65 Total Profit Increases
Uniform Pricing
Complete Price Discrimination
Direct Segment Discrimination
Which one of the policy is applied by
NCCU?
Oh My God!!!What is the correct answer
Uniform Pricing
• Leave buyers a lot of surplus• MR = MC• Set the incremental margin percentage equal to the
inverse of absolute value of price elasticity of demand• (price ‒ MC) / price = ‒1/e
Price
Buyer Surplus
MC
Wrong
Complete Price Discrimination
• Know the entire individual demand curve• Leaves no buyer with any surplus• Sells to every potential buyer
marginal cost
marginal unit
$
0quantity
Wrong
Direct Segment Discrimination
• Price by segment• Fixed identifiable characteristic – basis for segmentation
• age• gender• nationality• location
• No re-sale
Bingo
NCCU applies direct
segment discriminatio
n poilcy
• In reality, complete price discrimination cannot be realized as the sellers do not have sufficient information
•Segments • Different incremental margin among segments• -1/e• Lower the IM% to segments with high demand
elasticities
Direct Segment Discrimination
Identity
On Campus
Off Campus
NCCU Swimming Pool Regular Fares
Elasticity
Students VS Faculties
Students’price elasticities are relatively higher
Faculties ‘ price elasticities are relatively lower
Faculties have higher incremental margin percentage set higher price
Law of Demand
Faculties VS General Public
Faculties General Public
Encourage faculties to swim more at school’s swimming pool by setting a relative low price (lower than the market price)
Control the numbers of general public by setting a relative high price, in order to keep the swimming quality at school
Comparison of the Prices of Swimming Pool Tickets in Taipei
CityPlace Parks and Street
Lights Office, Public Works Department, Taipei City Government
Taipei Wen-shan Sports Center
Taipei Chung-Cheng Sports Center
NCCU Swimming Pool
Fare $110 $ 110 $ 110 Faculties $60
General Public $150
Higher than $110
Lower
No Resale Among Segments
Students
Faculties
Student ID
Faculties
General Public
Faculty ID
Some Extensions
•Homogeneous segments•Heterogeneous segment
Situation 1 all consumers identical within segment
• Suppose NCCU Swimming Pool provides service for faculties and students at the same marginal cost of $30
• Students are willing to pay $50, while faculties are willing to pay $90 for swimming per time. The willingness to pay of both segments exceed NCCU Swimming Pool’s MC. Therefore, it should set the price at $50 for students and $90 for faculties
• NCCU Swimming Pool would earn incremental margin of $20 from each student, and $60 from each faculty
• NCCU Swimming Pool is able to achieve complete price discrimination through direct segment discrimination
Situation 2 uniform price within segment• If buyers within each segment are heterogeneous and NCCU lacks sufficient
information to identify sub-segments, then it could apply uniform pricing within segments.
• Let the demand be as shown in figure1 and 2 next page:• 1. Suppose that the profit-maximizing price of faculties is X, the price elasticity of
demand is -1.5, then NCCU Swimming Pool should set the price at X • Suppose the IM=1/1.5, (X-30)/X=0.67; thus, the price of a faculty fare is $90, which
the quantity demanded is 5 tickets (per week)• 2. Suppose that the profit-maximizing price of students is Y , the price elasticity of
demand is -8/3, then NCCU Swimming Pool should set the price at Y • Suppose the IM=3/8, (Y-30)/Y=3/8 ; thus, the price of a student is $48, which the
quantity demanded is 3 tickets(per week)
On Campus: Students VS Faculties
Faculty Student
Figure 1Figure 2
• The faculty demand is less elastic. Therefore, NCCU should set a relatively high incremental margin percentage on faculty fares
• Profit Contribution(Faculties) : (90-30)*150=9000• Profit Contribution(Students) : (48-30)*500=12000• Total Profit Contribution=$21000
Externalities
What kind of property is
NCCU Swimming Pool Belong to?
Quasi-public Goods
Excludability Non-excludability
Rival Private GoodsEx: Food, Clothing
Common ResourceEx: Ocean resources
Non-rival
Club GoodsEx: Swimming Pool
Public GoodsEx: National Defense
Externality?
Positive Externality
Swimming
Increase Income
Lower the medical
expenditure
Income VS Health
The curve labeled y(h) shows the impact of health on the level of income per capita. For higher values of h, workers are able to produce more output, so the curve is upward sloping.
Negative ExternalitySummer
Demand for swimming increases
More people
CROWED
One cannot enjoy swimming
Negative Externality
Due to the heat, people’s preference on swimming increasesDemand curve shifts to the right (D1 →D2), equilibrium price increases(P1 →P2)
Problems & Solutions
How to solve the externalities?• Swimming Pool (non-rival) • Crowed in summer
•Germs are likely reproduce in the crowed pool
• Affect the consumers’ right of swimming
Problem:Same prices in both summer and winter
Solution
• Set different prices among different seasons
Different prices in summer and winter
• Fewer demand in winter
• Excess Supply
• More demand in summer
• Excess Demand
D S D S
40
40
• Lower the price in winter
• Raise the price in summer
D S D S
40
40
20 60
This can solve the problem of excess demand and supply, which makes the price and quantity back to the equilibrium. Thus, it solves the problems caused by the externalities, for instance, crowded swimming pool in summer
Different prices in summer and winter
Other Suggestions
Increase swimming pool profit!!!
How to increase the profit?
• Set up swimming classes • Sell some swimming
equipment
Set up swimming classes
This can encourage those who don’t swim originally to consume, which increases the consumers in NCCU swimming pool. more profit
Sell some swimming equipment
• Swimming Pool Rules:Those who don’t wear swimming suit, goggles and swimming cap aren’t allowed.
• People who do not have the swimming outfit with them have lower price elasticity of demand to these swimming equipment. Therefore, swimming pool can increase its profit by selling these products.
Swimming cap
goggles
Swimming Suit
Last but not least, …..
Improve Facilities
Enjoy Swimming Time!!