# 2 sealed bid pricing this pricing approach is popular

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2.Sealed-bid pricingThis pricing approach is popularwhen firms are asked to bid for jobsand would be most applicable forservice- oriented enterprises likeconstruction, catering services,travel and tours, and the like. Usingsealed bid pricing, a companybases its price rather than on itsown costs or its own demand.
Theexpectedprofitmethodinvolves fivesteps,namely:Theexpectedprofitmethodinvolves fivesteps,namely:201. The company determines a number ofpossible bids2. The company computes for the profitthat it will earn under each scenario;3. The company estimates the probabilityof winning the contract under thedifferent bids;4. The company computes for theexpected profit under each bid; and5. The company chooses the bid thatyields the highest expected profit.?1.The company determines a number ofpossible bids2.The company computes for the profitthat it will earn under each scenario;3.The company estimates the probabilityof winning the contract under thedifferent bids;4.The company computes for theexpected profit under each bid; and5.The company chooses the bid thatyields the highest expected profit.?
Example:Milko construction corporation is negotiating acontract with the finance corporation for theconstruction of a six-story building in Makati andwould like to decide how much to bid for thecontract. The company decides to use theexpected profit method and prepares variousestimates as shown in table 4.
COMPANY’S BIDCOMPANY”S PROFIT( 1 )PROBABILITY OF WINNINGTHE CONTRACT( 2 )EXPECTED PROFIT(1)X(2)P 300,000P 60,0000.7545,000P 500,000P 250,0000.62155,000P 800,000P 600,0000.57342,000P 1,000,000P 850,0000.38323,000P 1,500,000P 1,000,0000.12120,000Table 4.Application of the expected profit method bymilko constructionCorporation;
Product-MixPricingStrategiesProduct-MixPricingStrategies231. Product-line pricingThis is a pricing approach applicable to firms that develop productlines rather than single products.2. Optional- product pricingThis approach offers to sell optional or accessory products alongwith a main product.3. Captive-product pricingInstead of offering accessories to main product, captive productpricing would offer products that are essential to the main productitself.4. By-product pricingA by-product is a surplus product or item coming from the mainproduct itself.5. Product-bundle pricingIn this pricing technique, a company combines several of itsproducts into bundle and offers the bundle for sale at a reducedprice.1. Product-line pricingThis is a pricing approach applicable to firms that develop productlines rather than single products.2. Optional- product pricingThis approach offers to sell optional or accessory products alongwith a main product.3. Captive-product pricingInstead of offering accessories to main product, captive productpricing would offer products that are essential to the main productitself.

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Term
Spring
Professor
Scott