How do economists set prices and what is their suggestion to improve theater revenues?
Economists set prices after understanding the market demand and having analyzed the influences of own price, prices of related goods and incomes of the consumer on quantities demanded. They suggest using the two tier pricing technique to improve theater revenues: • Where a number of tickets are available at a higher set price for those consumers who prefer the guarantee of a seat and date confirmation to see an event. Part of the patron’s utility comes from having a guaranteed seat. • Then placing the remaining tickets up for sale for at lower price available on a first come first served basis. There is no guarantee of ticket availability for this patron when he/she desires to see the show. Using this method, Broadway Theater for instance gained revenues previously lost to scalpers in the form of ice. Unsold tickets at the high price are sold at an outlet in Times Square and two other locations in New York city at lower prices to boost reve nues. [For full credit, draw figures to compl
