Ron, The Director At The Annenberg Theater

Ron, the director at the Annenberg Theater, is planning his pricing strategy for a musical to be held in a 400-seat theater. He sets the full price at $120 and estimates demand at this price to be normally distributed with mean 300 and standard deviation of 100. Ron also decides to offer student-only advance sale tickets discounted 75% off the full price. Demand for the discounted student-only tickets is usually abundant and occurs well before full price ticket sales. a. Suppose Ron sets a 300-seat booking limit for the student-only tickets. What is the number of full-price tickets that Ron expects to sell? b. Compute the Expected Total Revenue for Ron considering the arrangement in part a. c. Based on a review of the show in another city, Ron updates his demand forecast for full-price tickets to be normal with mean of 200 and standard deviation of 50, but he does not change the ticket prices. What is the optimal protection level for full-price seats?

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