Indirect Price Discrimination

There are 1500 potential travellers each day on the London-Berlin

route. Some are Free-Spenders travellers who are willing to pay £ 400

for an unrestricted ticket and £ 240 for a restricted ticket; some are

Budget-Minded travellers who are willing to pay £ 180 for an unrestricted ticket and £ 150 for a restricted ticket. Travellers buy the ticket

that gives them the highest surplus (equal to the di§erence between the

willingness to pay and the price), provided that this surplus is positive.

(a) Suppose that 500 are Free-Spenders and 1,000 are Budget-Minded.

Compare various pricing policies and determine which one yields

the highest revenues.

(b) Suppose that 200 are Free-Spenders and 1,300 are Budget-Minded.

Compare various pricing policies and determine which one yields

the highest revenues.