管理经济学（英文）Ch10 Pricing Strategies for the Firm.pptVIP

Chapter 10: Pricing Strategies for the Firm Markup Pricing Firms establish production costs, then apply a markup to the average cost to determine price Markup pricing is considered a means of dealing with uncertainty in demand estimation Applying uniform markup to all products would not be profit-maximizing strategy Process of Applying Markups Establish a mathematical relationship between marginal revenue and the price elasticity of demand Review the profit-maximizing role of equating marginal revenue and marginal cost Show how marking up price above the average cost of production is equivalent to pricing according to the profit-maximizing rule Marginal Revenue and Price Elasticity of Demand Marginal Revenue and Price Elasticity of Demand Marginal Revenue and Price Elasticity of Demand Profit-Maximizing Profit-maximizing rule: a firm should produce that level of output where MR equals MC Now, adding economic theory and mathematics of optimization, it can be used in markup, when the size of the markup is inversely related to the price elasticity of demand Profit-Maximizing Profit-Maximizing Business Pricing Strategies In 1950s and ’60s, markup pricing generated debate about whether firms pursued goal of profit maximization Goal was to earn a pre-determined target rate of return Prices were “administered” to achieve this goal Business Pricing Strategies In 1980s, Elzinga found most firms earned lower rate of return in subsequent years compared with original study period Several of the original companies filed for bankruptcy or underwent reorganization Fog notes that prices can be determined along a continuum Managers can Use simple cost-based pricing to achieve acceptable outcome Use other types of inverse price elasticity rule, involving both demand and cost factors The latter will come closer to earning the maximum amount of profit possible Price Discrimination Practice of charging different prices to various groups of customers that a