Pricing Decisions

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General Comments:

  • 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:

  • Wikipedia
  • Business balls
  • Quick MBA
  • com
  • Tutor2u, economics help.org, economicsonline.co.uk
  • com
  • Smallbusiness, Chron, boundless.com, cliffsnotes.com
  • UKessays
  • Mindtools
  • Linkedin
  • Investopedia
  • Online dictionaries
  • co.uk
  • Any blogs, tabloids, newspapers or social media sites

Last Updated on February 18, 2018 by EssayPro