Chapter 3 - Demand analysis and optimal pricing. In chapter 2, we presented a simple model of profit maximization. There the manager began with demand and cost functions and used them to determine the profit-maximizing price and output level for a given product or service. In this chapter, we will take a closer look at demand and the role it plays in managerial decision making.
Managerial Economics, 8e William F. Samuelson ● Stephen G. Marks Chapter Three Demand Analysis and Optimal Pricing Copyright © 2015 John Wiley & Sons, Inc. All rights reserved There’s no brand loyalty so strong that the offer of “penny off” can’t overcome it ~A Marketing Aphorism Copyright © 2015 John Wiley & Sons, Inc. All rights reserved For Discussion Airline Ticket Pricing Anyone who has traveled via commercial airline, even on an infrequent basis, knows there is a bewildering plethora of fares for the same route Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Determinants of Demand The Demand Function The Demand Curve and Shifting Demand General Determinants of Demand Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3.1 A Shift in Demand Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Elasticity of Demand Price Elasticity Factors Affecting Price Elasticity Other Elasticities CrossPrice Elasticities Price Elasticity and Prediction Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3.2 extreme cases Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Demand analysis and Optimal Pricing Price Elasticity, Revenue, and Marginal Revenue Maximizing Revenue Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3.3 Demand, Revenue, and Marginal Revenue Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Demand analysis and Optimal Pricing Optimal Markup Pricing Business Behavior—Pricing in Practice Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Demand analysis and Optimal Pricing Price Discrimination Multinational Production and Pricing Revisited DemandBased Pricing Forms of Price Discrimination Information Goods Customized Pricing and Products The Economics of Groupon Airline Ticket Pricing Revisited Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Appendix to chapter 3 Consumer Preferences and Demand The Consumer’s Problem Indifference Curves The Budget Constraint Optimal Consumption Demand Curves Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.1 A Consumer’s Indifference Curves Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.2 The Consumer’s Budget Line Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.3 The Consumer’s Optimal consumption Bundle Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.4 The PriceConsumption curve Copyright © 2015 John Wiley & Sons, Inc. All rights reserved ... Customized Pricing and Products The Economics of Groupon Airline Ticket Pricing Revisited Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Appendix to chapter 3 Consumer Preferences and Demand... Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A .3 The Consumer’s Optimal consumption Bundle Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.4 The PriceConsumption curve Copyright © 2015 John Wiley & Sons, Inc. All rights reserved... Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.1 A Consumer’s Indifference Curves Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 3A.2 The Consumer’s Budget Line Copyright © 2015 John Wiley & Sons, Inc. All rights reserved