solution

The demand for a strong demander for a round of golf is PS = 6 – QS

where QS is the number of rounds demanded by a strong demander when the

price of a round of golf is PS. The demand for a weak demander for a round of golf is

PW = 4 – QW where QW is the number of rounds demanded by a weak demander when the

price of a round of golf is PW. The cost of providing an additional round of golf to either type of golfer is a constant 2. There is one golfer of each type. The club has decided that the best pricing policy is a two-part tariff. However, it’s your job to tell the club the optimal entry fee and the optimal use fee to maximize the club’s profit. The club cannot price discriminate on either the

use or the entry fee. The club’s fixed cost is 1. What are the club’s optimal use fee and the optimal entry fee?