Week 14_marketing strategy_price

Week 14_marketing strategy_price - Department of Food and...

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LESE204 Department of Food and Resource Economics Marketing Strategies - Pricing strategies -
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LESE204 Department of Food and Resource Economics 1. Pricing rule Pricing rule for monopoly or monopolistic competition - MR = P[1 + E q,p ]/ E q,p . Under the profits-max condition of MR = MC - Pricing rule: P = [E q,p /(1+ E q,p )] MC P Q D AC MC MR
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LESE204 Department of Food and Resource Economics 1. Pricing rule Pricing rule under Cournot Oligopoly Foc: Price elasticity of demand at individual firm level If q* i =q* j , then More firms result in less mark-up factor thus lower price i i i i FC q C q Q P ) ( ) ( 0 ) ( ) ( ) ( 0 ) ( ) ( ) ( 0 ) ( ] ) ( [ i i i i i i i i i i i i i q q C q Q Q P Q P q q C q q Q Q Q P Q P q FC q q C q q Q P q mc N E P p q ) 1 1 1 ( , 0 ) ( ) ( ) ( ) ( ) ( i i i q q C Q P Q q Q P Q Q Q P Q P Q q N i i 1 N Q q i 1 )) 1 /( ( , , p q p q NE NE mc P
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LESE204 Department of Food and Resource Economics 1. Pricing rule Pricing rule under Cournot oligopoly <example> Number of firms = 3 -mc±=±10 - price elasticity of demand = -0.5 P* = 10x (3x(-0.5)/[3x(-0.5)+1)] = 30 Number of firms = 4 P* = 10x (4x(-0.5)/[4x(-0.5)+1)] =20 )) 1 /( ( , , p q p q NE NE mc P
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LESE204 Department of Food and Resource Economics 2. Price discrimination intertemporal price discrimination : charging different prices at different points in time. D 1 MR 1 D 2 MR 2 MC Initially, the firm charges higher price to the consumers (early adopter) who have a high demand are unwilling to wait to buy. Later the price is lowered in order to capture the mass market (example: first release of the best-seller at a higher price with hard copy second release of it at a lower price with paper copy) P 1 P 2
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LESE204 Department of Food and Resource Economics 2. Price discrimination Peak-load pricing : charging higher price during higher demand of the year (or particular time of the year or so) D 1 MR 1 D 2 MR 2 MC Charge higher price at a peak time P 1 P 2
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LESE204 Department of Food and Resource Economics 2. Price discrimination Peak-load pricing : some times peak demand is higher than the capacity of the firm D 1 MR 1 D 2 MR 2 MC P 1 P 2 capacity
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LESE204 Department of Food and Resource Economics 3. Two-Part pricing Two-part pricing : fixed fee + per unit charge. <example>
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This note was uploaded on 03/25/2012 for the course MAR 3023 taught by Professor Lutz during the Fall '08 term at University of Florida.

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Week 14_marketing strategy_price - Department of Food and...

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