Price Discrimination: SouthSide Salon is a local bar and nightspot in Mankato. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter. Questions: Explain the economic significance of charging a $5 cover for the live musical acts (what kind of price discrimination is this?). Provide two (2) price discrimination schemes of 2nd and 3rd degrees that the bar could implement to increase profitability. Make sure to explain if identification and arbitrage are necessary conditions and why.

Price Discrimination: SouthSide Salon is a local bar and nightspot in Mankato. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter. Questions: Explain the economic significance of charging a $5 cover for the live musical acts (what kind of price discrimination is this?). Provide two (2) price discrimination schemes of 2nd and 3rd degrees that the bar could implement to increase profitability. Make sure to explain if identification and arbitrage are necessary conditions and why.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.12P

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