StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Price Discrimination Strategy - Term Paper Example

Comments (0) Cite this document
Summary
This paper highlights that the strategy of price discrimination is the policy in which customers are grouped on the basis of some criteria and different prices are fixed for each group for the same product or service. This strategy is followed to increase profit. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.5% of users find it useful
Price Discrimination Strategy
Read TextPreview

Extract of sample "Price Discrimination Strategy"

Report on exploring economic analysis and modern problems and the economic way of thinking. Price Discrimination Strategy The strategy of price discrimination is the policy in which customers are grouped on the basis of some criteria and different prices are fixed for each group for the same product or service. This strategy is followed to increase the profit. There are two groups in the town one group is that of local people and other is that of visitors to town. By increasing the price for the visitors by 25% than that of local people revenues can be increase tremendously
Price ceiling and Equilibrium Price
When a law restricts the seller to charge any product or service to a certain limit and not beyond that, it is called the price ceiling. It means the amount of maximum money one can charge for providing a product or service.
The price, at which the demand of a product in the market equals its supply, is called an Equilibrium Price. Excess demand or excess supply makes Disequilibrium. By putting a Price Ceiling below the Equilibrium Price creates Disequilibrium which will make the demand in excess of supply as is shown in the graph below:-
When the government put price ceiling on Cable TV below the current equilibrium price, the demand for Cable TV will increase. During this time if a new service is introduced, which will cost cheaper to the operator, will be readily accepted due to excess demand. This action will lead not only to increase in sales but also in revenues and profits.
Demand and Supply in the Perfectly Competitive Market
Perfectly competitive market is the situation where all the factors except demand and supply that affect market price are equal. In this situation, demand of goods and services reduces with the increase in price and demand increases with the reduction in price. This is called Law of Demand as is shown in the graph below.
When the demand for the product falls, the prices in the market will start to come down. In the short run, profits of the company will fall and in the long run the number of firms will decrease due to reducing profits.
When the demand for the product rises, the prices in the market will shoot up and go high. In the short run, profits of the company will increase and in the long run the number of firms will increase. New firms will be added to produce more products to meet the increased demand.
Long run Average Cost Curves
Long run Average Cost curve shows the average cost of production during the longer period of time. The production is done by selection of inputs that will cost lowest to produce a desired output.
Some long-run average cost curves are steeper on the downward side than others. This happens to the largest firms who tend to have cost advantage. It indicates that the industry is tending to become a monopoly, and hence is called a natural monopoly. Natural monopolies tend to exist in industries with high capital costs in relation to variable costs, such as water supply and electricity supply.
Price discrimination of time
The new product when launched is unique and there is hardly any competitive product alternative. However, as the time pass by and demand increases, the competitors come up with better product and cheaper price. So whenever we buy a new digital camera it will have higher price than six months later as by that time new competitors and technologies and products have entered.
The rationale and implications
The rationale behind the new guidelines by the Department of Justice and the Federal Trade Commission for evaluating proposed mergers is to ensure that the competitiveness of the market is not jeopardized and that the merger does not become a big monopoly supplier.
The implications of these guidelines is that billions of mergers occurred each year is now to be held up and first scrutinized by applying a range of analytical tools to evaluate competitive concerns in a limited period of time. There is now going to be a check and accountability of any major move by giant trading groups to monopolize and raise profits through unfair means.
References
Investopedia (2003). Economics basics: demand and supply. (n.d.). Retrieved from http://www.investopedia.com/university/economics/economics3.asp Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Write a report that answers questions that explore economic analysis Term Paper”, n.d.)
Write a report that answers questions that explore economic analysis Term Paper. Retrieved from https://studentshare.org/macro-microeconomics/1578248-write-a-report-that-answers-questions-that-explore-economic-analysis-and-modern-problems-and-the-economic-way-of-thinking
(Write a Report That Answers Questions That Explore Economic Analysis Term Paper)
Write a Report That Answers Questions That Explore Economic Analysis Term Paper. https://studentshare.org/macro-microeconomics/1578248-write-a-report-that-answers-questions-that-explore-economic-analysis-and-modern-problems-and-the-economic-way-of-thinking.
“Write a Report That Answers Questions That Explore Economic Analysis Term Paper”, n.d. https://studentshare.org/macro-microeconomics/1578248-write-a-report-that-answers-questions-that-explore-economic-analysis-and-modern-problems-and-the-economic-way-of-thinking.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Price Discrimination Strategy

Critical Themes and Perspective on Management Organisation and Strategy

At present, the mainstream management theory has failed to live up to the hype that was created in its name and the critical aspects can originate from such an undertaking within the management changeover processes. Thus mainstream management theory has pretty much put an end to the age-old thinking mindset yet failed to address the pertinent issues all said and done. (Cyert & March 1963)

Since mainstream management theory has come about due to the evolution of certain measures within the management regimes, it is a fact that the changing times have seen that the business world has evolved drastically and with that the different methodologies and the ways through which management regimes are carried out. One needs t...
6 Pages(1500 words)Coursework

The Marketing Communications Strategy & Mix: Sports Company

Despite the challenges that Adidas met in the 90s from fierce competitor Nike, the company hit the rebound by the end of that decade and has reclaimed its position as one of the leading sports companies nationwide. Considering that the company almost went bankrupt at its lowest point, it managed to rise and compete once again in the market.
With Adidas’ position in the sports apparel industry, this research aims to find out and evaluate the various marketing communications strategies that Adidas has implemented over the years. Further, this research aims to be able to identify which strategy is proven to be most effective, and which did not bring the desired results.

Football is undoubtedly the most popular s...
9 Pages(2250 words)Case Study

The Importance of Strategy Process

This is so done because the advantage is much needed in such a scenario and it will help the organization to grow beyond the anticipated proportions. Building and indeed sustaining this advantage is a very significant exercise when one speaks of a competitive advantage in the first place. Competitive advantage is something that is built over time and requires synchronization between the tactics, activities and the overall strategy of the company which is producing the product(s). Competitive advantage is developed when there is a differential undertaking on the part of the customer. This could be in the form of lower prices than the competitors, better quality, efficient sales services, and support and a number of other features....
10 Pages(2500 words)Assignment

E-Commerce Strategy and Customer Privicy

and Malaysia Airways homepage (see appendix 4,5,6) provides the user with an overview of their whole site, which is vitally important as (Nielsen, 2008) explains "The homepage is your companys face to the world." As recommended by Nielsen (2008) Easy Jet, British Airways and Malaysia Airways have used a tagline to capture and communicate the essence of the company; making the sites purpose immediately clear. Their logo is also apparent, boosting brand awareness, differentiating identity from competitors and providing familiarity to users. It can be found in the top left hand corner of the homepage, showing standard HTML conventions have been adopted.
Easy Jet, British Airways and Malaysia Airways use standard hyperlinks, tab...
8 Pages(2000 words)Assignment

Company Strategy to the Public Sector

The definition of corporate strategies emphasizes the need for the organization to satisfy the needs of all the stakeholders if the organization is to achieve its overall objective of maximizing shareholder value. Stakeholders include employees, customers and the communities in which the organization operates. Employees, customers, and communities, therefore, have a significant impact on the success of the organization and thus on the corporate strategy of the organization. In formulating corporate strategy, organizations need to identify and priorities strategic issues, which involve scanning, selecting, interpreting and validating information. (Schneider, 1989).
The aim of this paper is to explain the strategy of an organiz...
7 Pages(1750 words)Assignment

Stereotypes of Racial Discrimination and Violence

Media is largely responsible for influencing their viewers or listeners in a variety of ways. It could be as simple as the viewer changing his/her hairstyle to copy the exact look of a celebrity seen on television or in magazines, but for others, media can take over their lives and influence them to think differently. Although not a box-office hit, Crash was given good reviews by critics and the movie even managed to win the Best Picture Award in 2005 at the Oscars (Oscars.org, 2008), including two nominations for two Golden Globe Awards (Goldenglobes.org). This paper has analyzed the movie in the historical context, wherein it is discussed how different races have been perceived by different people for many years through the powe...
7 Pages(1750 words)Term Paper

Developing a Strategy to Enhance Workplace Learning in Workplace at Travelex Foreign Exchange

As earlier stated, I have chosen to answer Option No. 1 which is about drafting and crafting a strategic plan which can be implemented in my workplace as a learning workplace on the basis of its analysis and identification made in the earlier assignments. As also required, the initial paragraph, following this, makes a brief review of what has been done in Assignments 1 and 2. Since as a Training Coordinator, my job entails the induction, training and assessment of the progress of the new hires, I have focused my answer to these three areas and divided the paper into Induction and Training, and; Assessment/Evaluation.

The first assignment was about the physical and social environments of the workplace and in that assign...
8 Pages(2000 words)Assignment

Global Strategy for Crappy Shades

The company increased its workforce from 150 to 450 workers. The increased personnel was necessary to cater to a wider market but it also brought with it a variety of other problems like increased input cost and problem in labor management. Crappy shades are suffering from high costs which is clear from the financial data which says that out of a revenue of 35 million pounds a profit of 2.5 million pounds generated. The Net profit ratio is 7% which is far below the industry standard and does not maximize the value of shareholders. It is clear that the company is suffering from high direct costs, as the marketing activities comprise only 15% of the total sales. The company was also affected by the global economic downturn as well a...
7 Pages(1750 words)Case Study

The Trends in the Steel Industry and How It May Impact Nucor Corporations Strategy

The whole organization at Nucor’s revolves around the laid principles and focus on reinforcing to the extent that the organization is known for its culture and quality. Simultaneous quality checks and adherence are also as important building a strong culture for the organizations.

Nucor Corporation has always tried to challenge itself for further progress and to keep abreast of the industry of steel business.

Let us look at the trends observed in the business of the steel industry. The trend in the steel industry is very dynamic and always impacted by internal and extraneous factors. For almost 50 years the United States of America reigned in the industry of steel production, almost half of the entire p...
8 Pages(2000 words)Case Study

Why Price of Laptop Computers Fell

The price at this equilibrium was P0 and the Number of Laptops was Q0.
As the demand fell due to the reasons discussed below, the demand curve shifted to left, D1. If the prices were to stay at P0, the quantity demanded, Qx would have been much lower than quantity supplied, Q0. In order to increase consumer demand, firms would have to reduce the laptop prices until it reaches the new equilibrium level, P1. At this point, the market is in equilibrium. The reduction in price increases the demand and the new quantity of laptops in the market would be Q1.
The most basic thing to consider in determining the price of a laptop is the technology used in it (Neidalos, 2010). Technology advances at a very rapid pace in today&rsquo...
6 Pages(1500 words)Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic Price Discrimination Strategy for FREE!

Contact Us