ajaz_204_2009_lecture_20_DHL

ajaz_204_2009_lecture_20_DHL - University of Toronto...

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University of Toronto Department of Economics ECO 204 2009 2010 Sayed Ajaz Hussain DHL 1 Ajaz Hussain. Department of Economics. University of Toronto (St. George)
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Pricing: Uniform vs. Discrimination Economic theory: Price discrimination superior In fact, DHL currently practices price discrimination (esp. p. 10, 11) Examples? Yet, some managers are pressing for uniform pricing: If our pricing structures were consistent across regions, it would be much easier to consolidate regional reports. With better reporting, we could gain valuable information about our costs . . The simpler our pricing structure, the easier it is to hardware and software around the world [p. 1] Many of our large MNC customers have come to us and told us that they want a consolidated worldwide pricing structure . . If we don’t offer worldwide prices and our competitors do, are we going to lose some of our largest accounts? [p. 1] Ajaz Hussain. Department of Economics. University of Toronto (St. George) 2
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Economics Argument Economic theory: price/kg/mile should be set by: P = [E/(1 + E)]MC Routes with |E| and MC should have higher P We are the only company which services some regions of Africa. Thus, we charge premium prices in these markets. If we are forced to charge the same price as in other regions, we will only lose profits. Sales will not grow with lower prices. [p. 1] Ajaz Hussain. Department of Economics. University of Toronto (St. George)
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This note was uploaded on 05/02/2011 for the course ECO 204 taught by Professor Hussein during the Fall '08 term at University of Toronto- Toronto.

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ajaz_204_2009_lecture_20_DHL - University of Toronto...

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