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Agenda: Discuss The Chapter
Agenda: Discuss The Chapter
Agenda: Discuss The Chapter
Agenda:
Discuss the chapter
Price lasticity
A measure of sensitivity of consumers to changes in price
aailability f substitutes
.
substitute pr ducts
c mplimentary pr ducts
&
' (
)
D n t ary with Vary with the leel f Sum f the fixed and
pr ducti n r sales pr ducti n ariable c sts f r any
leels gien leel f pr ducti n
Rent Packaging
·eat Raw materials
nterest
Executie salaries
*+
A meth d f r determining the number f units that a firm must sell
at a gien price t c er all f its c sts (fixed and ariable)
Fixed C sts
Q(BE) =
Price ± Variable C sts Per Unit
1. The Ec n my
Recessi n: c nsumers are ?
, switch brands
l k f r the best price.
2. The C mpetiti n
Olig p ly: small number f suppliers c ntr l the market (airlines,
beer c mpanies, wireless pr iders). Price at the competition.
Markup Pricing
Benefits
± Simple
± Resellers (e.g., Zapp s) are certain ab ut c sts
± Price c mpetiti n (am ng resellers) is minimized (because
mark-up is standardized)
Disadantages
± gn res c nsumers¶ percepti n f alue
± gn res demand (if mark-up t high, demand may fall)
± gn res c mpetiti n (e.g., Lei, Gap, Diesel)
º-|
º
alue Pricing
ntr duced in the 1990¶s
Price kimming
Price kimming
Price Penetration
Firm charges a ery l w price f r new pr ducts (in the intr duct ry
stage f PLC) t sell m re in a sh rt peri d f time
Product Bundling
Selling tw r m re g ds r serices as a single package f r ne price
The single price is typically less than the t tal price f the items if
purchased separately (³wh le is less than the sum f its parts´)
Captive Pricing
Pricing f r tw items that must be used t gether
F r the Trade
Gien t resellers f r:
F r the Trade
Quantity iscounts
Cash iscounts
Manufacturer (C ke) gies reseller (Price Ch pper) a cash
disc unt f r paying their bill quickly
F r the Trade
easonal iscounts
Pr ide resellers (· me Dep t) price disc unts f r buying pr ducts
ff-seas n and either:
1. St ring the pr duct at the resellers l cati n until the right time
f year r,
Dynamic Pricing
Online, sellers can adjust prices quickly (i.e., use dynamic pricing)
t meet changing needs in the marketplace
Both types of sites adjust prices on the basis of supply and demand
/|
On-line Sh ppers
Reference Prices
nternal reference price
expected price O I ?
? (j <$50)
Credence goods ± een after y u hae purchased and used the pr duct
quality is still hard t assess (e.g., itamin supplements, car repair)
º
ddven Pricing
S me characteristics f l ss leaders:
Price Discriminati n
Example:
n 1994, the American B ksellers Ass ciati n (ABA; independent
b ksellers) filed a federal c mplaint against · ught n Mifflin C mpany
and ther b k publishers ± alleging that the publishers i lated the
R bins n-Patman Act by ffering price disc unts t large nati nal chains
(e.g., B rders, Barnes and N bel)
Price Fixing
Example:
N ember, 2008, US Justice Department f und the 3 largest flat-screen
pr ducers ± LG f S uth K rea, Sharp f Japan, and Chunghwa f Taiwan ±
guilty f price fixing. The 3 c mpanies pled guilty and agreed t pay
$585 milli n in criminal fines f r their r le in fixing the price f liquid
crystal display panels. Payment will g t American c mpanies affected
by the price-fixing (e.g., Dell, Apple, M t r la)
Predat ry Pricing
Example: