January 2, 2014

Managerial Economics of Basic Price - Joel Dean - Review Notes

Joel Dean stated that the firms activities can be viewed as three important ones.

1. Product development and improvement (innovation).
2. Sales promotion, and
3. Pricing

The objective of this chapter is to develop philosophy of price making and to explain how economic analysis and market research can be used to improve practical pricing.

The discussion focuses on manufacturers, who have some flexibility to set prices as their products are differentiated and also the setting is a multi-product firm.

Pricing objectives

While survival of the firm making the required return on capital is the broadest objective, on a more specific level various objectives can be rate of growth, market share, etc.

Pricing theory

Pricing theory indicated that concepts of demand and demand schedule, competitors actions, and cost of the product are relevant for pricing decisions.

Pricing research

Research needs to be done to information on the structure of competition, the behavior of the firm's costs, and the nature of demand.

Economic theory of monopoly pricing is discussed in the chapter.

In the case of new products pioneer pricing and maturity pricing are discussed.

Pricing of problems of oligopoly are discussed. The topic of cost-plus pricing is also covered in the chapter



Updated 2 Jan 2-14

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