Microeconomics: Pricing Strategy
A Fable of Fruit Vendors (9/7/2009)
Fruit vendors may choose perfect competition or pricing power depending on foot traffic and other locational advantages.
Fruit vendors may choose perfect competition or pricing power depending on foot traffic and other locational advantages.
A la carte or Set Menu? (5/9/2006)
Mixed bundling, by offering a package deal as well as separately priced items, can be a revenue-maximizing pricing strategy in the face of varying customer needs.
Mixed bundling, by offering a package deal as well as separately priced items, can be a revenue-maximizing pricing strategy in the face of varying customer needs.
A Matter of Costs (9/11/2007)
The rate at which variable cost changes in the short run is related to the nature of the fixed cost.
The rate at which variable cost changes in the short run is related to the nature of the fixed cost.
Airlines in Asia Offer Personalized Prices by Age, Race, Gender (1/23/1999)
Airlines in Asia Offer Personalized Prices by Age, Race, Gender.
Airlines in Asia Offer Personalized Prices by Age, Race, Gender.
Border Patrol (2/27/2007)
To enhance profit, businesses often sell non-interoperable versions of the same products in different markets.
To enhance profit, businesses often sell non-interoperable versions of the same products in different markets.
Bundling - flash (10/20/2006)
By selling goods in bundles with a lower bundle price than the sum of the prices sold separately, mixed bundling could increase total net revenue when demands are mostly negatively correlated and price discrimination is impossible.
By selling goods in bundles with a lower bundle price than the sum of the prices sold separately, mixed bundling could increase total net revenue when demands are mostly negatively correlated and price discrimination is impossible.
Bundling - youtube (9/27/2011)
Selling goods in a bundle could increase sellers' profit under certain demand and cost conditions.
Selling goods in a bundle could increase sellers' profit under certain demand and cost conditions.
Bundling (transcript) (3/27/2007)
By selling goods in bundles with a lower bundle price than the sum of the prices sold separately, mixed bundling could increase total net revenue when demands are mostly negatively correlated and price discrimination is impossible.
By selling goods in bundles with a lower bundle price than the sum of the prices sold separately, mixed bundling could increase total net revenue when demands are mostly negatively correlated and price discrimination is impossible.
Capping the Sky (9/11/2007)
Death-postponing cancer drugs command high prices because of the third-party payment health insurance system.
Death-postponing cancer drugs command high prices because of the third-party payment health insurance system.
Captive Customers (6/29/1999)
Prison inmates must pay much higher fees for using pay phones installed by exclusive phone carriers chosen by the state.
Prison inmates must pay much higher fees for using pay phones installed by exclusive phone carriers chosen by the state.
Cheap Pearls (2/16/2001)
Far from increasing consumer surplus, falling prices for luxury goods such as freshwater pearls due to overproduction reduce both consumer surplus and producer profit.
Far from increasing consumer surplus, falling prices for luxury goods such as freshwater pearls due to overproduction reduce both consumer surplus and producer profit.
Competitive Strategy (7/7/2006)
Static efficiency in mature products may be good for consumers in the short run, but dynamic efficiency in innovative products is what drives the economy and elevates consumer welfare in the long run.
Static efficiency in mature products may be good for consumers in the short run, but dynamic efficiency in innovative products is what drives the economy and elevates consumer welfare in the long run.
Death of the Music Middleman (3/7/2007)
The middleman role of music labels to produce, distribute, and promote albums has been compromised by the Internet to the benefit of the artists and consumers.
The middleman role of music labels to produce, distribute, and promote albums has been compromised by the Internet to the benefit of the artists and consumers.
Demand Elasticity and Total Revenue - youtube (11/2/2011)
A linear downward-sloping demand curve has a range of demand elasticities and an inverted U-shaped total revenue curve under single pricing.
A linear downward-sloping demand curve has a range of demand elasticities and an inverted U-shaped total revenue curve under single pricing.
Discriminating Business Sense (3/30/2001)
Club owner increases revenue by charging customers according to their demand elasticity.
Club owner increases revenue by charging customers according to their demand elasticity.
DVD or Wait (4/19/2001)
Film companies can increase their revenues by releasing higher-priced DVD's before lower-priced videocassettes.
Film companies can increase their revenues by releasing higher-priced DVD's before lower-priced videocassettes.
Excess Demand Blues - Scalpers profit from ticket shortage (2/23/2004)
Excess demand generated by low concert ticket price created profitable opportunity for scalpers.
Excess demand generated by low concert ticket price created profitable opportunity for scalpers.
Fare Game (11/9/2001)
The pricing strategy of charging premium prices for business travels and deeply discounted prices for leisure travels has fallen apart amid a slowing economy and fear of on-air terrorist attacks.
The pricing strategy of charging premium prices for business travels and deeply discounted prices for leisure travels has fallen apart amid a slowing economy and fear of on-air terrorist attacks.
Flat-rate Pricing (6/22/2006)
Flat-rate pricing may increase the bottom line of businesses when consumers over-estimate the amount they might consume and under-estimate the cost of un-restrained use.
Flat-rate pricing may increase the bottom line of businesses when consumers over-estimate the amount they might consume and under-estimate the cost of un-restrained use.
Flexible Pricing (2/26/2005)
The Internet has made it possible to replace fixed pricing with flexible pricing based on changing supply and demand conditions. Spot pricing will lead to a more efficient market with winners and losers.
The Internet has made it possible to replace fixed pricing with flexible pricing based on changing supply and demand conditions. Spot pricing will lead to a more efficient market with winners and losers.
Generating TR and MR for single-pricing searcher (9/19/2006)
Total revenue and marginal revenue can be derived from linear demand curve under single pricing for the price searcher.
Total revenue and marginal revenue can be derived from linear demand curve under single pricing for the price searcher.
How Much Is Anything Worth? (7/7/2006)
Price must cover cost for business survival but its level above cost varies with the product life cycle.
Price must cover cost for business survival but its level above cost varies with the product life cycle.
Licensing Textbooks (1/14/2006)
Unbundling the intellectual content from the physical embodiment of textbooks might lower the prices of textbooks.
Unbundling the intellectual content from the physical embodiment of textbooks might lower the prices of textbooks.
Load Pricing (9/17/2002)
Peak-load pricing can lower electric bills and increase business profitability by inducing household consumers to shift their consumption from higher-rate peak period to lower-rate slack period.
Peak-load pricing can lower electric bills and increase business profitability by inducing household consumers to shift their consumption from higher-rate peak period to lower-rate slack period.
Loss-leader Economy (1/10/2007)
Loss leaders might conceal punishing fee traps for the unwary myopic consumers.
Loss leaders might conceal punishing fee traps for the unwary myopic consumers.
Make Me an Offer (3/26/2007)
A salesman on commission has an incentive to practice perfect price discrimination.
A salesman on commission has an incentive to practice perfect price discrimination.
Market structure taxonomy (8/8/2006)
Market structure depends on the uniqueness of the products, barrier to entry, and scale economy. Specifically, the more unique the product, the higher the entry barrier, and the larger the scale economy is, the greater the pricing power.
Market structure depends on the uniqueness of the products, barrier to entry, and scale economy. Specifically, the more unique the product, the higher the entry barrier, and the larger the scale economy is, the greater the pricing power.
Mickey Mouse Economics (10/26/2002)
By spreading out large fixed cost over more customers, price discrimination directly increases Disney World's profit.
By spreading out large fixed cost over more customers, price discrimination directly increases Disney World's profit.
Noodle Price-hike Conspiracy (6/22/2006)
Price hike is difficult to sustain in commodity business with many competitors.
Price hike is difficult to sustain in commodity business with many competitors.
One Road's Congestion Is Another Road's Revenue (12/21/2001)
Charging motorists for contributing to rush-hour congestion may be economists' dream of internalizing negative externality on toll roads but politicians' nightmare when competing highways are free.
Charging motorists for contributing to rush-hour congestion may be economists' dream of internalizing negative externality on toll roads but politicians' nightmare when competing highways are free.
Pay What You Want (12/27/2014)
The pay-what-you-want model makes economic sense when it is used as a limited-time promotion and as a loss-leader to increase sale of higher profit-margin related products.
The pay-what-you-want model makes economic sense when it is used as a limited-time promotion and as a loss-leader to increase sale of higher profit-margin related products.
Premium from Freemium (12/30/2014)
Free public goods with close to zero marginal cost could profit from partial excludability.
Free public goods with close to zero marginal cost could profit from partial excludability.
Price Gouging - Historical vs Opportunity Cost cartoon (10/8/2017)
Pricing at opportunity cost rather than historical cost can solve market shortages. In other words, "price gouging" can be an unsung hero.
Pricing at opportunity cost rather than historical cost can solve market shortages. In other words, "price gouging" can be an unsung hero.
Price Searchers, Price Discriminators, and Price Takers (9/19/2006)
The uniqueness of products affects the pricing power of sellers.
The uniqueness of products affects the pricing power of sellers.
Price Signals as Guides for Resource Allocation (7/7/2006)
High prices for scarce resources ensure that these resources will be used for only high-valued purposes.
High prices for scarce resources ensure that these resources will be used for only high-valued purposes.
Pricing and economic surplus (7/7/2006)
Pricing affects how economic surplus is distributed between consumers and producers and thus the incentive and resources to come up with innovative products.
Pricing affects how economic surplus is distributed between consumers and producers and thus the incentive and resources to come up with innovative products.
Rebate Coupons (9/11/2007)
Mail-in rebate coupons succeed in promoting sales at relatively low cost because of low redemption rates.
Mail-in rebate coupons succeed in promoting sales at relatively low cost because of low redemption rates.
Should parking be free? - flash (6/23/2006)
Narrated lecture comparing total benefits under free vs paid parking when parking spaces are scarce.
Narrated lecture comparing total benefits under free vs paid parking when parking spaces are scarce.
Should parking be free? (transcript) (3/27/2007)
Narrated lecture comparing total benefits under free vs paid parking when parking spaces are scarce.
Narrated lecture comparing total benefits under free vs paid parking when parking spaces are scarce.
There Is No Free Parking (2/3/2007)
Free or subsidized parking has suffocated the development of mass transit and increased traffic congestion and air pollution.
Free or subsidized parking has suffocated the development of mass transit and increased traffic congestion and air pollution.
Total revenue and total cost of the price taker (9/19/2006)
Total revenue and total cost of the price taker when the firm's demand curve is horizontal.
Total revenue and total cost of the price taker when the firm's demand curve is horizontal.
Value Eating (6/22/2006)
Super-sizing fast-food items boosts both the bottom line and the waistline.
Super-sizing fast-food items boosts both the bottom line and the waistline.
Value-based Pricing (9/11/2007)
Innovative products offering high customer value should command value-based prices rather than cost-plus prices.
Innovative products offering high customer value should command value-based prices rather than cost-plus prices.
Virtual Scalping (6/21/2004)
Sports teams and other entertainment promoters use online secondary ticket auction market to compete with scalpers while sticking to uniform pricing for the primary market.
Sports teams and other entertainment promoters use online secondary ticket auction market to compete with scalpers while sticking to uniform pricing for the primary market.
