As in Q&A 10.4, a ski resort faces daily demand given by p = a – Q, where a varies from day to day. Over a three-day period, a takes on the values 80, 100, and 120. The marginal cost is zero. The fixed cost for the three-day period is $2,500. If the firm uses dynamic pricing, it changes its price every day to maximize profit. If it uses non-dynamic pricing, it sets the same price for all three days, assuming that a takes on its average value of 100 each day. Use math to calculate the consumer surplus and the firm’s profit over the three-day period under each pricing approach.
As in Q&A 10.4, a ski resort faces daily demand given by p =…
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