Question

Movie "A" is being released in video rental both US and Canda simultaenously later this month.

Demand for the movie has been estimated as: qdemandUS(p)=500,000−12,500p in the US and qdemandCan(p)=80,000−2,500p in the Canada, where p is the price of a movie rental in the local currency and q is the number of rentals per day. Once the studio has produced and released the film, there is no cost to making it available to an additional customer. a) If the studio can set different prices in each country, what price should it set for a rental of its film in the US, and what price for a rental of its film in the Canada? b) Identify the type of advanced pricing strategy being used. Justify your answer, and explain what (about the product, the consumers, and/or the market) makes this advanced pricing strategy feasible in this case.

Answer 1

US! ad Can ad sooooo - 125oop. Ro ooo - g soo Р. MCо. od US! 125ool- 500,ooo- p = 40- 125oo ad TR2 P xd z 400 - 0² دوی و MR = ATR - do 400 20 At 0. (MR 2 Mc) 40= 6250 10=250,000 unite P = 40-250000 ced= 40020 12 Joo Canada! d 25oop = soooora p = 32 atsoo ad TR = 1x0 = 322 - MR = 32 - = 32- 32 = - o 1250 4o ooo uot 32-40,000 و کا I= $16 $16.7 as "и (b) Charging different frices in different markets is known Third Regree discrimination. It u possible when : w Elasticity of demand different in two markets. when consumers market cannot meet another market. is consumer