Suppose that the amusement parkowner can practice perfect price discrimination by charging a different price for each ride. Assume that all rides have zero marginal cost and all consumers have the same tastes.

Question

Suppose that the amusement parkowner can practice perfect price discrimination by charging a different price for each ride. Assume that all rides have zero marginal cost and all consumers have the same tastes.

Will the monopolist do better charging for rides and setting a zero price for admission, or better by charging for admission and setting a zero price for rides?

Answer 1

The monopolist will do better by charging for admission and setting a zero price for rides. This is because the monopolist can maximize their profits by charging a higher price for admission and then allowing consumers to ride the rides for free. This way, the monopolist can capture the consumer surplus from the rides, while still charging a price for admission.