December 11, 2011

Economics of Price Differentials - Joel Dean - Managerial Economics - Review Notes

Firms offer different prices based on a list price to tailor the price to the peculiarities of the purchase situations.

Dean identified the following situations as giving rise to price differentials.

1. The trade status of the buyer
2. Amount of purchase
3. The location of the purchaser
4. The promptness of payment
5. The time of purchase
6. The personal situation of the buyer or the firm.

Goals of Differential prices

1. Implementation of market strategy
2. Market segmentation
3. Market expansion
4. Competitive adaptation
5. Reduction of production cost

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