You have two tickets to a Bruins game on a night that you are going to be out of

Question

You have two tickets to a Bruins game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only three people who will possibly buy a Bruins ticket. Their reservation prices are given below: Customer Reservation Price S20 S100 $120 You can sell the tickets by placing an ad where you mention the price for each ticket. Q7. How much revenue can you generate if you charge a single price of $20 for the two tickets? Q8. How much revenue can you generate if you charge a single price of $100 for the two tickets? 09. How much revenue can you generate if you charge a single price of $120 for the two tickets? Q10. Which of the prices fetches you the highest revenue? Q11. Next, you think about inviting bids using an English auction to sell your tickets. How much revenue can you generate using the English auction mechanism? Q12. Which pricing strategy gives you higher revenue- English Auction or charging a single price?

Explanation / Answer

Revenue if we charge a single price of $20 for the two tickets = $20*2 = $40 Revenue if we charge a single price of $100 for the two tickets = $100*2 = $200 Revenue if we charge a single price of $120 for the two tickets = $120*1 = $120 The price of $100 per ticket fetches the highest revenue since we will be able to sell both the tickets at this price at a higher sale value. If we follow the English auction method, we will be able to sell only one ticket at $120 per ticket, since the sale would be done to the highest bidder i.e. customer 3. We also assume that the customer will purchase only one ticket for himself. Charging a single price of $100 per ticket gives us more revenue since we will be able to sell both the tickets at $100 per ticket getting $200.

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