Saturday, September 20, 2014

Various Pricing Strategies

In class I have been talking about various pricing strategies that firms use ultimately to increase their profits or to meet some other objective (such as entering a new market).  Here is a (incomplete) list of pricing strategies and some additional details on some of them.

Thursday, September 18, 2014

Group Pricing By United Airlines

In class I have been talking about price discrimination or what might be better termed variable pricing.  (Not dynamic pricing as dynamic is time based pricing as opposed to customer based pricing - yes that article below calls it dynamic pricing, but I make a difference between the two).  United Airlines uses group pricing, where the groups are the customers demand for types of seats (more leg room, aisle seats, window seats, middle seats) and the article states that United will charge 16 different sets of prices for the same flight.  As I show in class, this type of pricing strategy (also called market segmentation) can be profit increasing when firms face similar marginal costs.

Wednesday, September 17, 2014

Online Music and Profit Maximization

The Economist back in 2009 argued that online music sellers should not set uniform prices in selling online music.  The article linked above does an excellent job of explaining how online music sellers can increase profits by charging different customers different prices due to difference in those buyers willingness to pay.  In class I will use this example to show how firms can increase their profits by following a variable pricing strategy.

Friday, September 12, 2014

Manufacturing Costs By Top Exporters

In my Industry Analysis and Managerial Economics course I talk about how a firm can minimize its total costs when producing a two or more different plants.  This can also be used when looking at two (or more) different countries.  The key is not to look at average costs, but at marginal costs between the two manufacturing plants or countries and produce such that the firm is equalizing the marginal costs between the different production facilities.

The Economist has a nice article showing the manufacturing costs adjusted for labor productivity are more similar that many would assume.  While these are average costs, they are indicative that marginal costs of manufacturing are also more similar than at first glance.

Wednesday, September 10, 2014

Broadband Competition

Here a US map by broadband provider.  You can choose to change the number of broadband providers by the minimum and maximum number of providers in the link above.  Notice that if you choose both the minimum and maximum number of broadband providers to be one, you find that there is a large portion of the US that is served by local broadband monopolists.

Wednesday, September 3, 2014

European Football Lockout

Danish football players face a lockout.  Today in Sports Economics I talk about the impact that lockouts have on league attendance and what we find is that statistically they do not have any impact on US sports leagues.  What would be interesting to look at is if Danish football fans have a similar or different response than US fans?