MKTG 351 PRICING (TOPIC 12 CH 20 AND 21) - CSUF, LANCELLOTTI| 15 QUESTIONS AND ANSWERS

Pricing One of the 4 P's; Of the 4 P's, this one is the most unique in that: 1. It's the only one that is revenue-generating 2. Has a direct effect on revenue But companies often focus so much on this that they lose sight of their product's quality Pricing in Different Types of Markets Based on market and demand factors; 4 types: 1. pure monopoly 2. monopolistic competition 3. oligopolistic competition 4. pure competition Pure monopoly Single seller in marketplace; In theory, can set price at whatever they want; would usually be high prices, but they are regulated, so they aren't necessarily allowed; govt generally breaks these up to prevent overwhelming power; Why might city allow this to occur? Easier to have one company provide that infrastructure. Ex: Utility companies, pharmaceutical companies, Comcast, Time Warner, Charter, USPS (quasi-govt entity/sanctioned, only first class mail deliverer) Oligopolistic Competition Multiple companies who work together and are sensitive to each other's prices in order to "collectively be a monopoly"; aka collusion; Ex: fuel companies, might include phone companies, OPEC (for a while, they really controlled the prices of oil; illegal to work with OPEC in U.S.) Monopolistic Competition Many buyers and sellers who trade over a range of prices; you trade over a range of prices; trade with range of prices; enough buyers and sellers to make it competitive Ex: basically any product: aspirin, eggs, fast food, vast majority of products in U.S. Pure competition Many buyers and sellers who have little effect on the price; extremely rare Ex: Survival Pricing Generally covers fixed cost Pricing Strategies Cost-Based Pricing Strategy Equilibrium Average Cost Curve At this point you are selling right at where you'll get the most revenue Price Floor a government- or group-imposed price control or limit on how low a price can be charged for a product. A price floor must be higher than the equilibrium price (between supply and demand) in order to be effective Marginal Cost The cost for each additional unit of production; "How much does it cost to produce one more unit of a good?" Elastic Demand Curve steep downward-sloping curve; Inelastic Demand Curve downward-sloping curve