ajaz_eco_204_2012_2013_chapter_16_Market_Power

94 price elasticity as the basis of segmentation

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Unformatted text preview: Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. decades12. Many other companies have used the DeBeers’ strategy of limited supply and brand cultivation and management. Consider for example, the Mini Cooper (owned by BMW). In 1998, VW introduced the New Beetle, a much improved version of the original Beetle. A 1955 Beetle The New Beetle Due to its retro, unique style and modern technology the New Beetle was an immediate hit and sales shot up. VW responded by ramping production and soon the New Beetle was everywhere and the novelty, “cool” factor wore off (if interested in car sales see Wardsauto.com). How can a product be cool if everyone else has it? New Beetle sales tapered off and today it’s a dud13. Thus when BMW produced the Mini Cooper, a retro styled car with modern engineering, it was careful not to make the same mistake and purposely limits production (resulting in excess demand) to preserve the novelty factor. 9.4 Price Elasticity as the Basis of “Segmentation” Wheneve...
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This document was uploaded on 01/19/2014.

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