Managerial Economics

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a private garage owner has identified two distinct market segments: short term parkers and all day parkers with respective demand curves of Ps = 3-(Qs/200) and Pc = 2-(Qc/200). Here Pis the average hourly rate and Q is the number of cars parked at this price. The garage owner is considering charging different prices (on a per hour basis) for short term parking and all day parking. the capacity of the garage is 600 cars and the cost of adding cars up to this limit is negligible.

What price should he charge for each type of parker? How many type of each parkerwill use the garage at this prices?

  • Managerial Economics -

    Take a shot, what do you think.
    Hint: you have a price-discriminating monopolist. First determine the Marginal revenue equations for each market. Marginal Cost is zero in both. So, allocate the marginal car to the market where MR is highest. Since the two demand curves have the same slope, at some point the two MR in each market will be the same -- at that point allocate the cars 50/50.

  • Managerial Economics -

    2(qs/200)=1-2(qc/200)

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