- The word count is 2500 words
- Harvard referencing style to be used
- 20 references minimum(20+)
Assignment’s question and how to frame the answer:
The question:How do firms set prices?
- This is economics module. Focus only on the economic aspect of the question, not marketing.
- Provide some critical thinking. Criticize the theories and models, not just explaining them (discuss the assumptions, can they be applied in real world).
- Include diagrams to demonstrate answers is possible whenever necessary.
How to frame the answer:
The question: How do firms set prices?
- There are four basic economic perspectives that must be covered:
- Pricing in perfectly competitive markets- e. no market power (all this is based on supply and demand)
- Pricing where market power exists
- Price discrimination and differential pricing with heterogeneous consumers
- Profit maximizing price-setting and pricing in practice
Note: You need to explain all the four points with examples.
Some additional things to think about:
- Include some of the following in your answer as well as appropriate:
- Market share
- Market positioning and segmentation (is price discrimination possible in these circumstances?)
- Differentiation and brand loyalty reduce the price elasticity of demand and what about horizontal demand curve?
- How do aggressive tactics affect pricing?
- The existence of complements, substitutes, barriers to entry, contestable market
- Consider gain theory, collusions versus competition, can Kinked demand curve lead to stable prices, structure conduct performance paradigm, Prisoner’s Dilemma
- You may also consider whether firms are motivated to maximize profit on the short or long term?
- How things are different from merit and demerit goods?
- The shareholders’ relation in revenue versus profit maximization (principal agent problem)
- How does product life affect pricing?
- Pricing including excluding tax liabilities?
- The influences of related products?
- Dynamic versus sticky prices?
- The difference between goods and services in b2b and b2c?
Note: Consider from the aforementioned points whatever you want. You don’t have to include them all.
Guidance for splitting the report:
- Introduction (150 words)
- Pricing in perfectly competitive markets- e. no market power (all this is based on supply and demand) (500 words)
- Pricing where market power exists, including the subsections (700 words)
- Price discrimination and differential pricing with heterogeneous consumers (500 words)
- Profit maximizing price-setting and pricing in practice (500 words)
- Conclusion (150 words)
Note: Long winded introduction and conclusion is pointless for the tutor
Inappropriate list of sources:
- Business balls
- Quick MBA
- Tutor2u, economics help.org, economicsonline.co.uk
- Smallbusiness, Chron, boundless.com, cliffsnotes.com
- Online dictionaries
- Any blogs, tabloids, newspapers or social media sites