Pricing

Pricing - Pricing Joint Products: The firms mangers must...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Pricing Joint Products: The firm’s mangers must take into account how pricing of one product impacts the sales and therefore marginal revenue earned by the other product. Some general “rules of thumb” After acquiring a substitute product Raise price on both products to avoid cannibalizing each other’s sales. Raise price by more on the low-margin (more elastic demand) product. Reposition the products so that there is less substitutability between them . After acquiring a complementary product Reduce price on both products to avoid cannibalizing each other’s sales.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
If fixed costs are large relative to marginal costs, and capacity is fixed, Price to fill available capacity. Price-related promotions (coupons, end-of-aisle displays, etc.) tend to make demand more elastic. If making demand more elastic, it makes sense to reduce price concurrently Product-related promotions (quality advertising, celebrity endorsements, etc.) tend to make demand less elastic. If making demand less elastic, it makes sense to raise price concurrently Other Pricing Strategies Cost -Plus Pricing Recall that MR = P(1 - (1/IeI)) At Profit max MR=MC and thus we can solve for P = MC/[1-(1/IeI)] and P/MC = IeI / (IeI-1)
Background image of page 2
Cartels Price Leadership (Tacit vs Overt Collusion) Barometric Dominant firm Revenue Maximization (sometimes subject to a specified level of profit)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/20/2011 for the course MGMT 524 taught by Professor Andrews,r during the Spring '08 term at VCU.

Page1 / 14

Pricing - Pricing Joint Products: The firms mangers must...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online