Monday, July 18, 2011

Upstream Firm Pricing

When an (upstream/manufacturer) firm sells to another (downstream/retailer) firm, the pricing problem becomes more difficult. The upstream firm only has feedback from the other firms they are selling to and does not clearly see how the final customers are reacting to the price of their manufactured products. The easiest way to tackle this problem theoretically is to assume that both the upstream and downstream firms are monopolists, which I do in Industry Analysis and the MBA Managerial Economic courses. Here is a nice article from Business Week that ties some of these theoretical ideas for those wanting a jump on this pricing problem.

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