Price Discrimination:

When a firm is able to charge different prices for the same or largely similar
goods and services to different customers and the discrimination is not due
to difference in cost it is a condition if price discrimination. It is fairly
common to observe firms charging different prices for the same products in
our daily life. For e.g. the price of movie ticket is higher on a weekend as
compared to a weekday. The driving force for price discrimination is that the
willingness to pay for a product varies across customers and according to
situations. The essential elements required for price discrimination are:

The firm must not be a price taker and should be in a position to have
an impact the price
Consumers should have varied willingness to pay for the product and
the firm should be able to understand the consumer willingness to
spend on the product
Arbitration should not be possible in the market

Entertainment Park is a well known example which uses a combination of

pricing strategies to generate maximum profit in the business. Every year
millions of people visit entertainment parks. This comprises people across all
age groups from school kids, teenagers, youth, family units, elders and
people and domestic and international tourists and visitors
All these consumers differ in their willingness to pay for the visit to
Entertainment Park AND THEIR spending depend according to the age group
and income levels. So essentially the theme parks leverage the range of
different pricing strategy to target different set of consumers and try to
extract maximum consumer surplus.
Lets have a look at the breakup of sources of revenue in entertainment
parks:

Sources of Revenue in Entertainment Parks

Merchandise; 10%
Food and Drinks; 17%
Others; 4%
Admission Ticket; 69%

As discussed above Entertainment Parks employ a combination of pricing

strategies for their products/services. In the next section we will discuss the
different pricing strategies we identified that were employed by different
entertainment parks.
Two Part Tarif
In Two-part Tariff system comprises of two parts which are mentioned below

Fixed one-time fee enabling the consumer to make further purchase

or use of the product/service

Secondary Fee which is charged on per unit consumption of

product/service

This is a fairly common pricing strategy employed by a large number of

entertainment parks. The objective of this pricing discrimination scheme is
to extract maximum consumer surplus. An entertainment park attracts a
large number of customers having varied willingness to pay. The admission
fees are optimized to extract maximum consumer surplus based on the
number of customers expected and their spending pattern.

A onetime Admission fees into the park which might also cover a
fixed number of ride. Generally these are the basic rides to get you
started.
The secondary feeis charged to the consumer on a per ride basis.
Consumer has to pay for every additional ride used.

Second Degree Price Discrimination

Multi-Day Passes
A major point of price discrimination is offered by providing multi-day passes
at lower cost as against purchasing ticket on a daily basis. Families or groups
on vacation and Foreign tourists are the major target customers of this
pricing strategy. Entertainment parks try to increase the time spend by a
consumer in the park by offering multi-day passes. The more time consumer
spends in the park the higher the amount he/she is likely to spend on
different sources increasing the revenue.
The below table shows the Pricing Scheme is offered by Walt Disney:

Savings/d
ay($)

Total
Savings
against
daily ticket
($)

94.00

5.00

10

91.34

7.66

22.98

73.50

25.50

102

60.80

38.20

191

Price/da
y($)
1Day
2Day
3Day
4Day
5Day

99.00

Other schemes used by Entertainment parks include offerings such as

4-tickets for the price of 3

5-tickets for the price of 4

Different Parks have employed different strategies to woo the customers but
the underlying premise remains the same i.e. by differentiating in the price
charged by increasing the product offerings to increase the revenue and
ultimately the profit for the park. Another interesting point to note is that
these strategies also help in promoting the brand.

Seasonal Price Discrimination

It is pretty intuitive that the demand will not remain same throughout the
year. The number of visitors varies as the seasonal cycle progresses in the
year. Entertainment parks charge different price based on the demand of the
tickets. Following the law of demand and supply the price are highest in the
summer break which is the holiday season. Another major peak season is
during the Christmas season in December when there is usually a weeklong
vacation.

High Price during the summer and Christmas Holiday season

Willingness to spend by the consumers is also high during these
seasons

Bulk Pricing
School students and University students represent a large share on
consumers of entertainment parks. To increase the sales the entertainment
parks offer special discounted price to school children to increase their sales.
School children can frequent the entertainment parks as part of their school
trips and field outings. This provides a value proposition to both the
consumers and buyers.

Price Discrimination on basis of Age Group

Entertainment parks are frequented by people of all age groups ranging
from children to adults. But the frequency of visit varies across age groups
and Parks generally segment their consumers to provide targeted price
offerings for different segments. The segment range can vary across
different entertainment parks based and can be derived through previous
patterns and demographics of that particular region. An example of the
strategy adopted is given below

Children below 3-years

Children between 3-12 years
Teenagers
Customers between 20-65 years
People above 65 years

Special Packages

Early Booking Advantage: 10-15% discount is offered on early

bookings. The offer can vary depending on the time of the booking.
Online Booking: Offers are also offered through onli9ne bookings to fix
the customers.