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2.1.11 - (2.1.11 Economics Continued What do Abella and...

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(2.1.11) Economics Continued… What do Abella and Farris Tell Us? Types of Pricing? o Relative Prices in the industry compared to your competitors. All the range of the prices o Absolute (avg price) Average of the prices of all the products More stable Market Power Model vs Information Model Retailer Manufacturer dynamic Overall: Advertised products sell for a higher cost and unadvertised lower when relative quality is taken into account Widely advertised products et the ceiling o Advertised products are setting the ceiling Role of Vertical Competition- Middleman as pivotal point to reduce price sensitivity and market power Advertising and China How much of our knowledge from more open economics applies to a more centralized planning economy? o Do the same principles hold true in China as the do the US? NO. specifically with prices—China’s govt sets those prices o Are the rules the same?
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