10 - Articles, August 1978 KENT B. MONROE and ALBERT J....

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Articles, August 1978 KENT B. MONROE and ALBERT J. DELLA The authors review the major pricing decisions that must be made by managers, explain the current price decision models, and suggest the developments necessary before pricing decisions can became more "scientific" in orientation. They suggest v/a/s market researchers can contribute to the creative development of new approaches to solving pricing problems. Models for Pricing Decisions Recently Oxenfeldt [32] suggested that pricing practice is mainly intuitive and routine, and that the pricing literature has produced few new insights or approaches to the setting of prices. Two reasons for this lack of creative development of new approaches to solving pricing problems are: (1) for some time the economists' theory of price has dominated despite the lack of realism in the theoretical structure and (2) until recent environmental changes, the seller's problem was not price but rather demand stimulation. Thus, there was little "payoff in studying how buyers respond to prices and price changes, or how to determine a set of optimal prices. The purposes of this article are to review the major pricing decisions that must be made by managers, to determine what decision models are available, to suggest developments necessary before pricing deci- sions can move from the largely intuitive state to a more scientific orientation. Moreover, where possible, recent behavioral advances in price perception are integrated into the discussion. As with any "state of the art" report, certain decisions are necessary to constrain the article to a reasonable length. The focus of this article is on four pricing decision areas: new product pricing decisions, product-line pricing decisions, price change decisions, and price structure decisions. Neither competitive bidding models, game theoretic models, nor brand switching models are covered because they have a 'Kent B. Monroe is Professor of Marketing. College of Business, Virginia Polytechnic Institute and State University. Albert J. Delia Bitta is Associate Professor of Marketing Management, College of Business Administration, University of Rhode Island, Kingston. relatively strong modeling tradition. Several interac- tive marketing mix models have been developed that do include price decisions [e.g. 4, 21, 36]. However, these marketing mix models are not discussed, pri- marily because space limitations preclude expanding discussion to price and joint marketing variable in- teractions. Overview The specific models reviewed in each of the four decision areas are Hsted in Table 1. Each decision area is discussed separately. First, the decision area itself is reviewed briefly to characterize its nature and scope, as well as some of the interrelated decisions that are involved. Next, the specific models relating to the area are described and critically evaluated. The article concludes with summary comments on the nature of pricing models and marketing research.
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This note was uploaded on 11/10/2010 for the course MAR 4803 taught by Professor Allen,j during the Spring '08 term at University of Central Florida.

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10 - Articles, August 1978 KENT B. MONROE and ALBERT J....

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