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46 Cards in this Set
- Front
- Back
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3DPD
2DPD bundling |
segment into submarkets by indicators, sterotypes. (seniors, kids, coupons)
when buyer types are unknown, provide a menu of options so buyers self select. nonlinear pricing. extract fully from light users, but split pie with heavy users. (jazz club, calling plans, cedar point) combos to extract more than just a la carte (microsoft office, restaurant menus) |
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resale and black markets
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expect thriving black market (arbitrage)
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price discrimination
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bottom line: price discrimination occurs if sellers adapt different prices to extract different WTP's
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3DPD across time
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charge premium for hardcover books, friday night movies, new hardware + software.
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intertemporal 3DPD
movie showtimes movies skit resort hotels books software, hardware |
p @ 9 PM fri > p 1 PM mon
p new > p 2nd-run P dec > P jun books: p hardcover > p softcover p new > p old |
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bertrand pricing
cournot pricing |
firms have limitless capacity and pick their prices
firms pick capaicity and pick their prices |
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nash equilibrium (bertrand model)
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where 2 lines cross where it is the lowest price. price that is offered by both firms that are equal
ONLY EXISTS WHEN THERE IS NO INCENTIVE TO CHANGE PRICE: each firms price is their best response to their rival |
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with perfect substitutes (identical products) how much of market can you capture
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100%, 50% or 0%
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answer to price war
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differentiate your product
brand names logos |
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reaction curve
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avoids cutthroat price wars
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shift of demand curve for monopolistic competition
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when more firms enter, less demand from the firm, lower prices.
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product differentiation:
segmentation |
divide market into smaller buyer groups
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product differentiation:
targeting |
evaluate each segment
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product differentiation:
differntiation |
alter products to create superior customer value
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product differentiation:
positioning |
place product in a clear, distinctive, desirable location
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segmentation strategies:
geographic |
by climate, density, country, region...
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segmentation strategies:
deomgraphic |
age, gender, religion, race
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segmentation strategies:
psychographic |
social class, lifestyle, personality
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segmentation strategies:
behavoiral |
occasions, benefits, loyalty status
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targeting spectrum
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undifferentiated
differentiated concentrated micromarketing |
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value propositions:
more for more more for the same more for less same for less less for much less |
mercedes, rolex
lexus vs mercedes temporary, but tough to sustain same brands @ lower prices (wal mart) dollar store |
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principle of minimum differntation
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capture max # consumers by moving toward the center (gas station, restaurant,clusters at highway exits
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market entry
new good, same market new good, new market same good, new market same good, same market |
mac book air
s. asian restuarant in woo continental non stops to green bay 4th mcdonalds in wooster |
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entry barriers
economies of scale patents govt franchises large sunk cost absolute cost advantage brand name (loyal customers) entry deterence |
-boeing vs build plane in garage
-patents, copyright, trademarks -govt franchises -specialized equiptment -produce for cheaper -loyal customers by existing brand -limit pricing (set price at costs) pay people to not enter market capacity commitment (build extra factory to make credible threat to cut prices) learning by doing (exising firms do it better, cheaper) raising rivals cost (by diamond mines) |
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to enter foreign market
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1. build here then export
2. build foreign factory 3. aquire foreign factory |
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timing: being first to market
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product first to capture all of market
create entry barriers following firms must overcome reputa |
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market penetration
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how long is takes a product to becomes widely accepted by the market
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stages of s curve
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introduction
growth maturity decline |
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succession
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older technologies being replaced by newer ones
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standards war
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two technologies competiting to become accepted by the market
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game theory
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models strategic interaction. one players actions effect anothers well beings, and relationships are of rivalrous nature.
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complications of bertrand model (14-21)
capacity contraints heterogenoes goods. transaction costs uniformed customers uncertain quality bargaining |
see slide
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draw and label and bertrand model graph
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draw
p1 as a fctr of p2 p2 as a factor of p1 prices on axes 45 degree line (where p1=p2) |
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why can 1 not use calculus to solve bertrand model prices
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because of discontinuous residual demand curves
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what do we learn about many sellers and identical products from bertrand model
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it does not require many sellers to produce fierce competition
identical products produce competition. product differentiation is the key to remember |
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lesson learned from location model (fixed price) (hotelling)
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LOCATE RIGHT NEXT TO COMPETITOR ON WIDER SIDE. IF EITHER TO THE LEFT OR RIGHT DOES NOT MATTER, THEN PICK 1.
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lesson learned from fixed price, location model with travel costs
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locate as far away from the poles as possible without having territories overlap
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fixed location pricing model
what each of the variables in the function stands for |
each variable is not in respect to each other. it is where the firm, customer is physically located on the block or what the price is.
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is cutting prices the best idea in a fixed location setting?
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no, it may reduce revenue
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lesson learned from fixed location, price model
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must weight whether to enter market. charging lower prices may capture more of the market but it may reduce revenue by a greater factor. before entering, choose where to locate and what price to charge, unless regulated by government or available space.
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axes of s curve
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x=time, y=performance
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sucession
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the introduction of new technologies
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sales cannabilization
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introuction of new product produces loss in sale of new product
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shift of demand for monopoly when firms enter
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MR, demand curve shifts inward
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family of reactions
perfect substitutes imperfect substitutes monopoly |
firms will try to undercut each other
firms are only somehwat concerend about each others prices firm will charge their desired price, regardless of what other firm is doing. |
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residual demand
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consumers who have not yet purchased
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