Tuesday, September 15, 2009

Radiohead & Personalized Pricing

In 2007 Radiohead announced that fans could download their new album, and the price - was set by the fans. Now this is an example of personalized pricing, where the firm (rock band) has the customers tell them what they are willing to pay for the product (album) and the firm charges them this price. Since the marginal cost of downloading an album - up to capacity - is negligible, then Radiohead has an incentive to sell as many albums as possible.

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