Assignment 3 (Group) Prima Donna Pricing: Raising Revenue at the New York City Opera The New York City Opera is scheduled to perform sixteen different operas in the 2001-2002 season, for a total of more than one hundred performances. You have been hired as the NYCO pricing consultant and asked to revise their pricing policy in order to maximize revenue. A market research team has previously determined some basic numbers regarding the demand for opera. Specifically, the following table shows, for each patron type, the willingness to pay per opera performance as a function of the number of operas attended during the season. The table also shows the number of patrons of each type. Willingness to pay (in $) per additional performance by patron type and by number of performances attended: Number of Number of performances Patrons 1 2-4 5-8 9+ Die-hard opera fans 200 100 100 100 100 Regular opera fans 800 80 80 60 40 Occasional opera goers 1,400 80 50 10 0 First-time opera goers 1,000 40 0 0 0 Tourists who are opera fans 300 100 0 0 0 Other tourists 2,400 40 0 0 0 Students who are opera fans 100 50 50 50 50 Other students 800 40 20 10 0 There are three parameters you can work with. First, in addition to single-performance tickets, the NYCO offers custom plans for series of performances. Second, tickets can either be purchased in advance or in the day of the performance (subject to availability). Only students and tourists are willing to buy same-day tickets. However, they suffer a 20% loss in willingness to pay from the additional hassle. Finally, students can be identified with student ID at no cost to the NYMO. For the purpose of this problem, suppose each opera is performed only once (on Saturday) and that the opera house (at Lincoln Center) has a capacity of 1,100 seats. To further simplify the problem, assume that all seats, from the orchestra section to the fourth ring, are equally valuable and equally priced. Finally, ticket re-sales are minimal. (a) Recommend to the New York City Opera a pricing plan that produces the greatest revenue. Firms and MarketsAssignments and ProblemsOpera Page 2 (b) Check the NYCO website at http://www.nycopera.com/www/index.cfm. Find out what the different pricing options are. How would The NYCO perform (financially, that is) if they were to implement their actual policy instead of one you recommended in above? (For the purpose of this question, assume that the relevant price is that of third-ring seats.) (c) What aspects of reality, not depicted in this problem, would explain the discrepancy between (a) and (b)? Written by Luís Cabral and David Backus for the purpose of class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. While this case was inspired by real-world events, some of the figures presented above are fictional. © 2001 David Backus and Luís