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Unformatted text preview: a “low” sticker price, pl. M&S 452 — Strat and Org
c 2008 Scott Schaefer – Suppose two divisions of the same ﬁrm produce products that are close substitutes. • Illustration: External Beneﬁts and Costs of Pricing Decisions External Beneﬁts and Costs d d
d External cost of price reduction.
Does not factor into
Chevy decision at all. d
d 24 pl ph d T P d d
d d d d d Demand for Beer d d Q Q Demand for Pretzels E E T P • Suppose two divisions of the same ﬁrm produce products that are complements. M&S 452 — Strat and Org
c 2008 Scott Schaefer • External costs mean too much of the activity. Chevy’s price will be too low. Divisional cost of price reduction
Aﬀects Chevy decision through comparison
to divisional beneﬁt. © Total cost to ﬁrm
of Chevy’s price reduction • When Chevy reduces its price, what are the costs to the ﬁrm? • Will Chevy make the right decision? Interdivisional Trade 26 – When one of a ﬁrm’s divisions makes an input that is used by anoth...
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This document was uploaded on 02/20/2014.
- Spring '14