chapterchapterfifteenfifteen©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.Preparedby:Fernando&YvonnQuijanoPricingStrategy2of19©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER15:PricingStrategyAfterstudyingthischapter,youshouldbeableto:Definethelawofonepriceandexplaintheroleofarbitrage.Explainhowafirmcanincreaseitsprofitsthroughpricediscrimination.Explainhowsomefirmsincreasetheirprofitsthroughtheuseofoddpricing,cost-pluspricing,andtwo-parttariffs.GettingintoWaltDisneyWorld:OnePriceDoesNotFitAllLEARNINGOBJECTIVES123Inthischapter,wewillstudysomecommonpricingstrategies,andwewillseehowDisneyandotherfirmsusethesestrategiestoincreasetheirprofits.3of19©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER15:PricingStrategyPricingStrategyandtheLawofOnePriceLEARNINGOBJECTIVE1ArbitrageTransactionscostsThecostsintimeandotherresourcesthatpartiesincurintheprocessofagreeingtoandcarryingoutanexchangeofgoodsorservices.IsArbitrageJustaRip-off?a.DoeseBayserveausefuleconomicpurpose?Economistswouldsaythatitdoes.15-1LEARNINGOBJECTIVE24of19©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER15:PricingStrategyPricingStrategyandtheLawofOnePriceWhyDon’tAllFirmsChargetheSamePrice?PRODUCT:HARRYPOTTERANDTHEHALF-BLOODPRINCECOMPANYPRICEAmazon.com$20.95BarnesandNoble.com20.95WaitForeverForYourOrder.com18.50JustStartedinBusinessLastWednesday.com17.75WhichCompanyWouldYouBuyFrom?15–15of19©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER15:PricingStrategyPriceDiscrimination:ChargingDifferentPricesfortheSameProductLEARNINGOBJECTIVE2PricediscriminationChargingdifferentpricestodifferentcustomersforthesameproductwhenthepricedifferencesarenotduetodifferencesincost.6of19©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER15:PricingSt...
