We’re bringing back price theory with our series on Price Theory problems with Professor Bryan Cutsinger. You can view the previous problem and Cutsinger’s solution here and here.
Share your proposed solutions in the Comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post his proposed solution shortly thereafter. May the graphs be ever in your favor, and long live price theory!
Question: Uber offers a membership option that entitles members to a percentage reduction in the price of Uber rides. Evaluate the following two statements:
1- Suppose an Uber customer is indifferent between becoming an Uber member or paying the standard Uber ride price. This customer will never spend less, and, in general, will spend more on Uber rides if the customer becomes a member. (Assume that Uber rides are a homogenous good.)
2- Introducing the membership option can never reduce the number of Uber rides this customer takes.
