Question

U2 – Pricing for fans: the fans always go for the GA tickets (“the best seats, also the cheapest”). U2 is debating whether to offer discounts to U2.com members for GA tickets. There are 10,000 U2.com members in France, and U2 believes that they would all would show up if entrance was free. Members are mostly low-budget teenagers and students, so the most that any of them could afford to pay for a GA ticket is €80. Hence, demand for members can be estimated by the linear model DM=10,000–125P. For the general public, demand is estimated as DG=40,000–200P. For security reasons, no more than 20,000 standing tickets may be sold at the SdF.

1. a) Is it a good idea to give discounts to members, and if so what discount is most profitable? In general, when is it a good idea to discount member tickets?

2. b) If U2 were to charge a single price for GA tickets, what would it be? Which customer segments benefit from differential pricing?

3. c) The band feels it would not be fair to give more than a €30 (or $40) discount to members (so as not to encourage people to buy U2 membership just for the concert discount). What prices should be charged then?

Answer 1