Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 25

Mickey Mouse Monopoly
The centerpiece of Disney's Florida theme parks, the Magic Kingdom, is a unique attraction. Amusement park aficionados agree the Magic Kingdom has few substitutes. With this market power, Disney has not been shy about exploring a variety of approaches to price discrimination.
Two-Part Pricing
As of 2014, Disney's pricing scheme for the Magic Kingdom resembles the two-part schemes discussed in the chapter. It charges an admission fee of $95, but then the patron can ride as many rides as he or she wants at no additional charge (only limited by the long lines at popular rides). This is consistent with the best two-part tariff that we found in the numerical example in Figure 11.7. There, we found the profit-maximizing per-ride price is marginal cost. Disney's scheme is profitmaximizing if one thinks that the marginal cost of an additional rider is close to zero. Disney has probably found that the $95 gets the right number of people into the park.
Multiday Tickets
Disney's vast complex of parks could entertain a family for upwards of a week. The value of each successive day diminishes as one spends more time at the amusement parks. Disney has a nonlinear pricing scheme for its multiday tickets that takes account of diminishing values. Figure 1 graphs various measures of price for different packages of days. One can see from the graph that this is a nonlinear pricing scheme. A linear pricing scheme would have a constant per-day price, but in the graph, it is declining. The most striking feature of the graph is that the consumer is charged almost nothing for the fourth and later days. This strategy induces consumers to stay in the park longer to spend money on complementary products.
Multiproduct Monopoly
Disney is not just selling rides at its theme parks. It is also selling complementary goods such as hotel stays, food, and souvenirs. As any park goer will complain, the prices for these complements are well above marginal cost. Still, the prices for these complements are less than one might expect from a stand-alone monopoly hotel, restaurant, or souvenir shop. Disney recognizes that if these prices become too high, they will feed back to reduced park attendance.
Market Separation
Disney also uses observable consumer characteristics to separate them into different markets. It offers about a 6% price discount for children under 10. It also offers a deal to Florida residents. Floridians may have lower values for Disney theme parks than out-of-staters because they have "been there, done that" or because they can substitute more readily toward competing amusement parks.
Busch owns another complex of amusement parks (including Busch Gardens and Sea-World). Research its pricing schemes, comparing and contrasting them to Disney's.