| Course | BUS 540 Managerial Economics |
|---|---|
| Module | Module 6 |
| Paper type | Pricing strategy analysis |
| Length | About 1,075 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for BUS 540 Module 6
Same Seat, Different Prices: Price Discrimination, Bundling and Versioning for a Performing Arts Center
Student Name
MBA Program, Aspen University
BUS 540: Managerial Economics
Instructor Name
Month Day, Year
Same Seat, Different Prices: Price Discrimination, Bundling and Versioning for a Performing Arts Center
Treasure Valley Performing Arts Center, a composite nonprofit venue in Boise, Idaho, presents about 120 performances a year in a 1,200-seat hall: touring musicals, symphony concerts, dance, comedy and family shows. For most performances it charges a single price, currently $68, with the same price for every seat and every night. Average occupancy is 71%, but Friday and Saturday shows often sell out while Tuesday and Wednesday performances may be half empty. The board has asked whether a different pricing approach would raise revenue and attendance. This paper applies economic pricing strategies to answer.
Why One Price Is Not Enough
A single price works well only if customers value the product similarly. The center's audience does not. A couple celebrating an anniversary on a Saturday values front orchestra seats far more than a student who would gladly sit in the balcony on a Tuesday. At $68, the center loses the student, who would pay $30, and undercharges the couple, who would pay $110. Baye and Prince (2022) explain that firms with market power can increase profit by charging prices that track these differences, provided they can separate customers and prevent resale.
Price Discrimination by Group and Time
Leslie (2004) studied ticket pricing for a Broadway production and estimated what would happen under alternative pricing. He found that the theater's actual practice of varied prices, by seat quality and through discounts, raised profit by about 5% compared with the best single price, while average consumer welfare changed little. Live performances are well suited to such pricing because tickets are tied to a time and seat and customers differ widely in valuation.
The center can separate groups that differ in willingness to pay. Students with valid identification and seniors can receive discounted prices for weeknight performances, verified at the door. Weeknight and Sunday matinee performances can be priced lower than Friday and Saturday evenings. These differences are hard to arbitrage because tickets are linked to dates and, for discounts, to identification.
Bundling Into Subscriptions
Adams and Yellen (1976) showed that bundling can raise revenue when customers' valuations of products are negatively related: some value one product highly and another little, while others have the reverse pattern. A bundle price can then capture more of each customer's total willingness to pay than separate prices. The table shows two patrons' maximum willingness to pay for a touring musical and a symphony concert.
If the center sells the shows separately, its best prices are $50 for the musical and $40 for the symphony, earning $180 from both patrons, or $95 for the musical and $85 for the symphony, selling one ticket each and earning $180. A bundle of both shows at $130 sells to both patrons, earning $260. The bundle works because each patron's high value for one show offsets a low value for the other. Season subscriptions apply this logic across the year's program.
| Patron | Musical | Symphony | Both |
|---|---|---|---|
| Patron A | $95 | $40 | $135 |
| Patron B | $50 | $85 | $135 |
Versioning by Seat Tier
Shapiro and Varian (1998) argued that sellers of information goods should offer several versions at different prices and let customers choose, sorting themselves by willingness to pay. Seats work the same way. The center will create three tiers: premium orchestra seats at $95, standard seats at $68 and balcony seats at $42 for weekend shows, with lower prices on weeknights. Customers who care about the view pay more; budget-conscious customers still attend.
A Membership as a Two-Part Price
A two-part price charges a fixed fee for access plus a price per use. The center will offer a $90 annual membership that gives 25% off tickets, early access and free exchanges. Frequent attendees, who value the discounts, pay the fee; occasional attendees do not. The fee captures part of frequent patrons' surplus while lowering their per-ticket price, encouraging more visits.
Dynamic Pricing for High-Demand Shows
Some touring musicals sell out within days, which signals that the price is below what many patrons would pay. The center could raise prices as seats sell for these shows, a practice common in airlines and sports. It should do so cautiously: patrons accept higher prices for premium seats and popular dates more readily than they accept a price that changes by the hour. The center will set a small number of pre-announced price steps, such as a higher price once 70% of seats are sold, rather than adjusting continuously, and it will never raise the price of a ticket after a patron has added it to a cart.
What the Box Office Needs
The strategies require operational changes. The ticketing system must support seat tiers, day-of-week prices, verified discounts and membership pricing, which the center's current vendor offers at an added fee of about $18,000 a year. Box office staff need training to check student and senior identification without slowing lines, and the website must show prices clearly by section before patrons choose seats.
Comparing Revenue
Using last season's attendance by night and section, and conservative assumptions about how groups would respond, the center's finance director estimated annual ticket revenue under the current and proposed approaches.
The combined approach raises estimated revenue by about $720,000, or 10%, and attendance by about 13%, mainly on weeknights. The gains exceed Leslie's estimate for one Broadway show because the center currently uses a single price and has more empty weeknight capacity.
| Approach | Estimated attendance | Estimated ticket revenue |
|---|---|---|
| Single $68 price, current | 102,000 | $6.94 million |
| Tiered seats and day-of-week prices | 108,000 | $7.31 million |
| Tiers, weekday prices and student and senior discounts | 112,000 | $7.42 million |
| All of the above plus subscriptions and membership | 115,000 | $7.66 million |
Fairness and Customer Response
Pricing that customers see as unfair can damage loyalty. The center will publish its price tiers clearly, explain that weeknight and student prices exist to make performances accessible, and avoid sudden price increases for popular shows after tickets go on sale. As a nonprofit with a community mission, it can present discounted prices as part of that mission.
Conclusion
A single ticket price ignores the wide differences in what audiences will pay. Price discrimination by group and time, subscription bundles, seat tiers and a membership each capture more of that variation while bringing more people into the hall. With clear communication and safeguards for fairness, the redesign could raise ticket revenue by about a tenth and fill weeknight seats that now sit empty.
References
Adams, W. J., & Yellen, J. L. (1976). Commodity bundling and the burden of monopoly. Quarterly Journal of Economics, 90(3), 475-498. https://doi.org/10.2307/1886045
Baye, M. R., & Prince, J. T. (2022). Managerial economics and business strategy (10th ed.). McGraw Hill.
Leslie, P. (2004). Price discrimination in Broadway theater. RAND Journal of Economics, 35(3), 520-541. https://doi.org/10.2307/1593706
Shapiro, C., & Varian, H. R. (1998). Versioning: The smart way to sell information. Harvard Business Review, 76(6), 106-114.
What the BUS 540 Module 6 instructions ask for
The Aspen catalog presents BUS 540 as applying microeconomics to an individual business's decisions, and a pricing strategies module usually asks students to evaluate advanced pricing methods such as price discrimination, bundling, two-part pricing or versioning for a firm. Several methods are tried here on a single venue. Explain why a single price is often not optimal when customers value a product differently. For each strategy, state the conditions it requires, such as the ability to separate customer groups or prevent resale. Use research or examples to show effects. Work through at least one numerical example. Compare revenue or profit under the alternatives. Address fairness and customer reaction, since pricing that feels unfair can backfire.
Inside the BUS 540 Module 6 example
The paper opens with Treasure Valley Performing Arts Center, its $68 single price and 71% average occupancy. A section explains that customers' willingness to pay varies by group and timing, which a single price ignores. Leslie's RAND Journal of Economics study of a Broadway production found that the theater's varied ticket prices raised profit by about 5% compared with the best single price. Group and timing discrimination proposes student, senior and weeknight prices. Adams and Yellen's Quarterly Journal of Economics article explains bundling, and a table shows two patrons whose different valuations of a musical and a symphony make a $130 bundle earn more than separate prices. Shapiro and Varian's Harvard Business Review article supports three seat tiers. A membership adds a two-part price. A revenue comparison and fairness safeguards close the paper.
Where the marks sit in the BUS 540 Module 6 rubric
Pricing strategy papers in an MBA economics course are marked on correct use of the conditions for each strategy, sound numerical reasoning, use of evidence and attention to customer response. This example states the conditions for price discrimination, such as identifying groups and preventing resale, and explains how the center meets them. The willingness-to-pay table lets the grader verify that the bundle earns more than separate prices, which is the key insight of Adams and Yellen's Quarterly Journal of Economics article. Leslie's study of Broadway pricing provides evidence that varied prices raise profit in live entertainment specifically, and Shapiro and Varian's Harvard Business Review article supports versioning. The revenue comparison states its assumptions, and the fairness section shows awareness that perceived unfairness can undermine pricing.
Common BUS 540 Module 6 mistakes, and how to avoid them
Pricing papers lose ground when they name a strategy but never show that its preconditions hold. Price discrimination works only if customers can be separated and resale prevented; say how. Another is a bundling argument without numbers; a simple willingness-to-pay table shows why bundles can earn more. Distinguish strategies clearly: price discrimination charges different prices for the same product, versioning offers different products, bundling sells products together and two-part pricing combines a fee with a per-use price. Use research or real examples. Compare revenue under the options with stated assumptions. Address fairness and customer reaction. Finally, consider costs and practical limits, such as box office systems and staff time, since a strategy that cannot be run well will not deliver its theoretical gains.
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BUS 540 Module 6 questions, answered
What does BUS 540 Module 6 usually ask for?
Aspen's BUS 540 covers pricing strategies in this module, so applying methods such as price discrimination, bundling, versioning or two-part pricing to a business is typical. Follow your classroom prompt.
What is price discrimination?
Charging different customers different prices for the same product when the differences are not based on cost, which requires separating customer groups and preventing resale.
Why can bundling raise revenue?
When customers value products differently, a bundle price can capture more of their combined willingness to pay than separate prices.
Where can I find a free BUS 540 Module 6 sample paper?
The complete analysis is above: a performing arts center's pricing redesign with group and timing prices, a bundling table, seat tiers, a membership and a revenue comparison.
What is versioning?
Offering different versions of a product at different prices, such as seat tiers, so customers sort themselves by what they are willing to pay.