–Case background (SCP): industry, behavioral patterns,

consequences à relevance to topic - Mritenya

–Key facts (SCP): stakeholders, strategies (available
and chosen), profits, timing, un/knowns - Thanusree
–Theoretical assumptions (S): key facts à players,
actions, payoffs, static/dynamic, information - Jadon
–Theoretical analysis (CP): derive equilibrium strategies
and outcomes - Yu Xiang
–Implications (P): social welfare, strategic and
regulatory evaluation - Pranav
Case 1

Universal Studios Singapore operates in the theme park and entertainment industry, which
plays a crucial role in attracting local and foreign visitors. USS can be characterised as a
monopoly due to the ability to set prices, high entry barriers and lack of substitutes in
Singapore.

USS practices 2nd degree price discrimination by offering different packages of tickets for
consumers to self select themselves into these groups based on their willingness to pay.

Key facts:

Stakeholders include USS management, visitors, local and foreign competitors

Strategies include tier pricing and bundling

Case 2

Telecommunications Pricing - different tier plans with different data usage levels, network
speed etc
High demand users will pay more but low demand customers will choose basic/lite plans

Case 3
Streaming services Pricing - different plans for different number of screens that family is
using and the streaming quality. For people who want to stream on multiple devices at the
same time (high demand) will choose premium plans with better resolutions but low demand
consumers will choose basic/ad free plans etc. recently, netflix, disney have additional user
plans which also help in 2nd degree PD.
Case 4

Gillette safety razor - A form of two-part tariffs

Customers first pay for the razor itself (fixed cost) and then continue to pay for the blades
(variable cost). This system allows companies like Gillette to attract customers with a
relatively low initial cost, but then make a profit on the recurring blade purchases.

(I feel that this is a good company to analyse as we can give different cases to showcase
how pricing strategies could influence profit and business strategies)

Case 5

Spotify:

- Free vs. Premium Tiers

- Family and Student Plans
- Individual Premium Plans

Apple:
- iPhone Models with Different Storage Options
- iPhone 15, iPhone 15 Pro, and iPhone 15 Pro Max - line variation
- MacBook Air vs Pro

CASE 6

Entrance Fee - Fixed Cost

Monthly Fee - Variable Cost
Case 7

Credit card

High Annual fee (High FC), more perks/privileges/discounts (Low VC)

Low Annual fee, lesser discounts (High vc)

Question for Prof:

1. The exact definition for 2nd degree price discrimination
2. Ask him about 3 of our cases. (Credit Card, USS and Streaming Services)
Choose something that has a very clear cut of fix and variable fees

3. Do you have to be a monopolist/oligopoly to do price discrimination

4. TDP format (pdf?) Canva?

Comments:
Q1. The exact definition for 2nd degree price discrimination
-> Follow the definition from the lecture notes, which means we have to strictly
follow the two-part tariff (fixed cost and variable cost)

Q2. Ask him about 3 of our cases. (Credit Card, USS and Streaming Services)
-> So the main takeaway me and Jadon had is that he is quite strict on the two-part
tariff, he mentioned that as long as we can justify where the fixed cost and variable
cost are, he is okay - With that said, he did point out that all 3 of our ideas didn’t really
quite hit the mark (we need a case where the fixed cost and variable cost is explicitly
mentioned)

-------------------------------------------------------------------------------------------------------------------------------------

Updated Cases:
1) Ezlink Transport
- Consumers can self select themselves into different categories depending on
their willingness to pay
- Both bus and train concession → high FC, 0 VC
- Either bus/train concession → Mid FC, mid VC
- No concession → low FC, high VC

2) Food Delivery services

- Grabunlimited: premium tier which provides free delivery and vouchers
3) Shopee Tiered Membership
- Classic - No membership cost, No cashback
- Silver - Min $250 spending, $90 cashback
- Gold - Min $1000 spending, $150 cashback
- Platinum - Min $3000 spending, $325 cashback

4) The Gym Pod

- Standard - no monthly fee, $7.5 per session
- Premium - moderate fixed cost 12.90 per month, $5.25 per session
- Starter - high fixed cost $69 per month - 10 free sessions + discounts
after that

5) ClassPass
- Classpass is a subscription-based fitness and wellness platform that
provides members with access to a wide range of gyms, fitness
studios, and wellness centers. (They are an intermediary and do not
own any of the facilities)

- Classpass uses credit as a currency for booking classes and their

memberships revolves around this credits
(a) $20 for 8 credits (avg. cost = $2.5/C)
(b) $65 for 27 credits (avg. cost = $2.407/C)
(c) $99 for 45 credits (avg. cost = $2.2/C)
(d) $149 for 68 credits (avg. cost = $2.19/C)
(e) $189 for 90 credits (avg. cost = $2.1/C)
(f) $299 for 142 credits (avg. cost = $2.105/C)
(g) $315 for 150 credits (avg. cost = $2.1/C)
- If you ran out of credits within a month, you have the ability to top-up at
a differentiated price based on your membership tier
- [Interesting fact] Booking classes at peak period will cost more credits
then during off-peak periods (sometimes up to 50%
discount/difference)
Gym Pod Pricing
[Link]
of-people-with-gym-memberships-by-brand/
- 2020 data - there is no other recent data available
-
About Gyms in singapore
Lot of competitors - active sg, anytime fitness
Increasing popularity of gym memberships
Behaviour of people who subscribe to gym subscriber

Highlight the USP for gym pod - private sessions, smaller size of pods

Stakeholders:
1. Customers: Individuals seeking flexible gym options, including fitness
enthusiasts, busy professionals, and those who prefer private workout
environments.
2. Employees: Trainers and staff who work within Gym Pods, focusing on
customer service and client retention.
3. Other fitness facilities and boutique gyms that offer similar or alternative
workout solutions, such as traditional gyms, fitness studios, and online fitness
programs.

Strategies Available
1. Low demand users - only variable cost of $7.50 per session
2. Medium demand users - fixed cost of $12.90 + $5.25 per session
3. High demand users - fixed cost of $69 + $3.55 per session
[(2x$6 + 18x$5.25)/30]

Consumers self select plan based on their expected usage

Theoretical assumptions (S): key facts à players, actions, payoffs, static/dynamic,
information

Key Assumptions:
- Consumers’ WTP are exclusive and will not prefer another consumer’s pricing
tier
- Inconsistent preference bc they dont choose who they rly are but what they
wanna be
- They choose the tier tht give them the most perceived CS
- The Gym Pod has the ability to set and influence prices
- The Gym Pod has incomplete information on consumers’ exact WTP
- Interaction is dynamic
- Can observe other players actions in the market and react accordingly
- Can observe consumers actions and changes in demand and react
accordingly

Actions:
- Gym Pod will set different price levels (FC & VC) based on consumers’ WTP.
This is done through varying FC in the form of membership premium and
varying VC in the form of amount paid per session/discounts/bundle deals
- Consumers self select themselves into the different pricing tiers based off
their frequency of gym usage and willingness to pay

Payoffs:
- The Gym Pod aims to maximise profit by extracting consumer surplus as
much as possible through the self selection of consumers into various price
tiers, together with producer surplus earned from the variable cost
- Consumers aim to maximise their C.S through self selecting themselves into
different price tiers based on their usage frequency and with the best price
possible

Information:
- Gym pod has incomplete information on consumers demand and preferences
- Gym pod has imperfect information on other players in the market
- Consumers may have incomplete information on Gym Pod if information
portrayed by Gym Pod is unclear
- Consumers may not understand the pricing structure entirely and self
select themselves wrongly into a suboptimal pricing tier
- May affect future expectations
 Theoretical analysis (CP): derive equilibrium strategies
and outcomes

Note: Prices are counted for every 30 mins

KEYNOTE:
(1) Premium/Standard = 5.25/7.50 = 0.70 >> Therefore Premium gives a
discount of 30% per session
(2) According to the App, prices are not at the prices stated above, but instead
can be AS LOW AS the prices above. A $7.50 pod is usually around $9.50.
However, I will be using the $7.50 prices instead
Narrative
Case 1: For consumer 1 (give a name) who is someone who has just started gyming,
and is currently still learning the ropes of gyming. He/She would want to keep this to
a minimum and opt for the standard plan

(FROM EMAIL: Starter plans comes on top of the Premium Subscriber Plan
10 Free >> next 2 is 20% off subscriber price (5.25)>> all afterwards are 30% off
>> 20% off = 0.80*5.25 = $4.2 for next 2 session >> 30% off normal pricing =
0.70*7.50 = $5.25

All Analysis are in the excel file

([Link]
a4sj2QNnG0HR7juDLYcpKuOcEoKqD2HaCzcE/edit?usp=sharing)
Implications (Social welfare, strategic and regulatory evaluation)

1. Market Segmentation - Gym pod’s subscription plan based on customer’s

usage allows it to capture different market segments such as casual users
who benefit without any subscription and at the same time regular users who
can benefit from the subscription plan based on their frequency of usage. This
allows it to penetrate deeper into the market.
2. Revenue Maximization and Customer Lifetime Value - Through price
discrimination, Gym Pod maximizes its revenue by capturing the consumer
surplus from different types of users. The flexible plans encourage customers
to start with lower-commitment options, allowing the company to convert them
into long-term members as they grow more accustomed to the service. This
progression boosts customer retention and maximizes the lifetime value of
each customer. Moreover, diversified pricing provides revenue stability, as
customers can shift to lower-tier plans during economic downturns, reducing
the likelihood of outright cancellations and maintaining a steady revenue
stream.
3. Potential Drawbacks for Lower-Income Users: Although the system
promotes accessibility, some users may still feel priced out, due to higher
upfront cost in premium plans. The presence of discounts in premium plans
could also potentially exclude low-income consumers who can't afford upfront
payments.
4. Economic Efficiency and Resource Utilization
From an economic perspective, this pricing model encourages users to self-
segment based on their gym usage frequency:
● Demand Allocation: Different pricing tiers can help The Gym Pod optimize
occupancy, reducing the chance of peak-time overcrowding in certain pods
and encouraging off-peak usage. This also supports cost savings in staffing
and maintenance, since utilization is more predictable and balanced.
● Reduced Overconsumption: With lower-frequency plans available, the gym
might avoid scenarios where members overuse resources simply to justify
their membership costs, a common issue in traditional gyms. This aligns with
sustainable usage practices, as the company likely uses fewer resources per
user compared to larger gym facilities.
5. Competitive Differentiation and Market Expansion
The Gym Pod’s unique model positions it to stand out in a highly competitive
industry:
● Expansion into Under-Served Locations: Unlike traditional gyms requiring
large spaces, compact gyms can be strategically placed in high-foot-traffic but
under-served areas like transportation hubs, residential complexes, and
business districts. This further enhances the attractiveness of its flexible
pricing by making access geographically convenient.
 ● Data-Driven Personalization: The Gym Pod could leverage user data to
offer personalized discounts or recommend plan upgrades based on usage
patterns. For example, a user approaching a monthly usage threshold on a
weekly plan might be incentivized to switch to a monthly subscription. This
personalization encourages optimal pricing that aligns with user behavior.
6. Risks of Cannibalization and Market Saturation
While offering varied plans, The Gym Pod risks internal competition:
● Plan Cannibalization: If standard plan is too attractive, it may draw potential
premium or starter pack users, cannibalizing higher revenue segments.
Managing price sensitivity and maintaining a clear value difference between
plans are crucial to prevent cannibalization.

Research Paper/Articles

[Link] - people tend to pay more

fixed costs and attend less while they can benefit from paying per use fees

[Link]

[Link]
Interesting things:

- Think in terms of IO model, cost vs revenue side

- Studies show that people take up mega plans so that they can motivate
themselves and not worth it for them
- Can play ^ to enrich, can look into behaviorial econs
- Perceived preference, inconsistent preference
- Consumer surplus calculations, choice of optimal tariff, instead of consistent
preference, can use inconsistent preferences and choose what they want to
be
- But in the end they lose out - time inconsistent preferences
- Its okay if data is up to 2020, have some solid eg that is still present, can do
comparisons within companies..?
- Analysis portion: be careful if wanna analayse from biz side bc they dk the
actual utility of these people, can fine tune the tariffs along the way
- Implications can suggest to the company what to do, expect q abit of business
perspective

Practical Implication - for business owner, what u can do better

Demand Plan
Low Demand Prefer to pay low fixed fee and higher variable costs
Consumer

Medium Demand Prefer to pay higher fixed fee and moderate variable costs
Consumer

High Demand Prefer to pay high fixed cost and low variable costs
Consumer
Relevant Articles:

The impact of different price promotions on customer retention - [Link]

[Link]/science/article/pii/S0969698916303411

Prevalence and pricing of chain gyms in New York City - [Link]

[Link]/doi/full/10.1080/14635240.2015.1069717#d1e176

[Link]

Jadon:
Moving on to the assumptions. Let's take a look at the actions in which both the gym
pod and consumers will take

In this model, once consumers choose a pricing tier, they will stick to it and will not
switch to a different tier level.

The self-selection mechanism ensures that consumers pick the option that gives
them the greatest perceived value based on their unique preferences

Although The Gym Pod doesn’t have specific information on individual consumer
demands, it can set three distinct pricing tiers to cater to different consumer
segments.

For the payoffs, the Gym Pod’s goal is to maximise profit by capturing as much
consumer surplus as possible. By encouraging consumers to self-select into different
pricing tiers, The Gym Pod can extract surplus effectively, tailoring its revenue
capture to each consumer’s perceived value

For consumers, the aim is to maximise their perceived consumer surplus. They
achieve this by evaluating the available pricing options and selecting the tier that
best aligns with their willingness to pay, ensuring they receive the most value for the
cost

However, The Gym Pod has incomplete information on consumers demand and
preferences

For our subsequent analysis, we will assume that the Base Price for Each Session is
fixed at SGD$9.50, and any discounts given by the company will be multiplied by this
base cost.

We will have a case study of 4 people with different preferences for the gym, the first
3 of which will have consistent preferences, while the last one will account for
inconsistent preferences

Amanda, who wants to keep fit but doesn’t have time to visit the gym regularly and
she estimates that she would only do 8 sessions per month.

Bianca who goes to the gym regularly, Based on her consumption patterns, she
estimates that she would go for 16 sessions per month.

Cassandra is an active individual who's looking to scale up her exercising habits.

Based on her consumption patterns, she is likely to go for 32 sessions a month

However Diana is a first-time gym goer and does not know how many
times she wants to go to the gym per month. As such, Diana, who was
overly optimistic, believes that she would require ≥30 sessions per month.

Yu Xiang Script
Thank you, Jadon. Now, I’ll be discussing our analysis of how individuals chooses
their preferred plans.

Before continuing, note that our team has made some assumptions about the
demand function; specifically, we have developed a few arbitrary demand functions
to better showcase how the previously mentioned individuals would select their
plans.

With that said, Firstly, Amanda is likely to have the demand function of a low-
demand consumer, modelled by Q = 7.8 - (8/95)P. Using this equation, we can
derive that Amanda will achieve her highest consumer surplus of 332.5 by choosing
the standard plan. This meant that at equilibrium, she would visit the gym 7 times for
$9.5 per session and pay a total of (9.5 times 7 equals) $66.50.

Secondly, as the Medium Demand Consumer, Bianca will have the demand function
of Q = 17.2 - (12/35)*P. As such, she would attain the highest consumer surplus of
304.3 from choosing the Starter Plan, which also meant that her equilibrium
consumption would be at 16 sessions, at $3.50 each, totalling $90 per month.

Thirdly, in Cassandra’s case, her high demand would be represented by Q = 30 - P,

which would net her the highest consumer surplus of 323.5 if she chooses the Power
Plan, at which she would be visiting the gym 30 times per month and pay a total of
$149 with no variable fees due to the nature of her plan.

Intuitively, the above analysis makes sense as the choice that provides the highest
consumer surplus is also the choice that provides the lowest cost to the individual
with their specific demand curve.

However, as consumers, we are not as rational as we would like to be. Hence, the
fourth case exemplified by Diana shows how irrational consumers consume as she is
a low-demand consumer who had optimistically signed up for the Power Plan, and
as such, she would have only netted a consumer surplus of 216.8 instead of 332.5 if
she had chosen to pay per entry. This also translates to an estimated $54 loss as
she had underutilised her gym plans.

Now, I’ll pass my time to Pranav.