Many hotels rely on promotions in order to increase sales. Say you are a hotel manager choosing between two different promotions: a Buy Three, Get Fourth Free promotion (BOGOF), and Half-Price promotion. Before any promotion was announced, Angela and Betty (two potential buyers), were separately planning to stay at the hotel for two nights each this month.
Each has the same income and allocates the same budget to her vacation. In two diagrams (one for each potential buyer), shows that Angela takes advantage of the BOGOF promotion and Betty does not because their tastes differ.
As an alternative to the BOGOF promotion ("the fourth night free if you pay for three nights"), the resort could offer a half-price promotion in which, after staying two nights at full price, the next two nights are half the usual price. Assume the resort earns the same revenue from either promotion if someone stays four nights.
Draw the new situation in each of the diagrams you used in part (a).
Which promotion would be more effective for which buyer?