Price Discrimination | Amusement Parks Essay

Words: 1244
Pages: 5

JWI 515: Assignment Four: Price Discrimination
Amusement Parks
Professor Serluco
Managerial Economics

Charles W. Slaven
November 30th, 2014

Consider these Amusement park pricing scenarios:
Six Flags Discovery kingdom sells its annual season pass for $59.99. According to its website, “Buy your Season Pass for $59.99, just $14 more than a one-day admission.”
Bush Gardens Dark Continent. sells its Fun Card for $95.00. According to its website, “Pay for a Day, Get now through 2015 FREE.”,
Now why would they give away an unlimited entry annual pass for an extra 25% over the single entry price?
What is common in these pricing scenarios?
All these businesses are practicing what economists call, “Metered Price
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Since they own the roller coaster, they can restrict access to the best picture locations. Price discrimination takes place in that they control the supply completely. Calculate the highest price the market is willing to pay and sit back, you’ve eliminated the competition while they are in the park.
One type of membership popular with both Bush Gardens and Walt Disney World customers is the add-on (up charge) for water park entry in addition to the amusement park entry at a reduced “bundled” price. Water park capacity is likely to be considerably less than the amusement park so the profit maximization point must take into account the “limited capacity” constraint. The reduced revenues from the amusement park tickets vs. full price tickets needs to be tracked so supply of the amusement/water park bundles does not, or to the best case achievable, negatively impact the supply of the water park “single park” utilization. Profit maximization can be best achieved by limiting the bundle availability to key periods during the annual calendar when excess capacity exists at the water park. Bundling will fill the gap between current utilization and current capacity at the water park while providing added perceived value to the purchase of a amusement park ticket.
Peak Load Pricing
The customers of annual passes are further discriminated by those that have the capability to tailor entry dates away from peak load periods. Ex. Walt Disney World “Florida Resident”