Price fixation research

Document Type:Research Paper

Subject Area:Economics

Document 1

p. Different types of goods behave differently towards price variation. The difference in responsiveness portrayed by the demand for different types of goods to prices changes leads to the creation of different categories of price elasticities. There are five price elasticities of demand which include perfectly elastic demand, perfectly inelastic demand, relatively elastic demand, relatively inelastic demand and unitary elastic demand. Perfectly elastic demand refers to a scenario where a slight change in price leads to more than proportionate change in quantity demanded of a product. This project is intended to provide a comparison between prices of similar products in three different clothing stores in Los Angeles. Furthermore, the price comparison will help Bloomingdale’s department store manager at Los Angeles to evaluate the probable reaction of changing the prices of the products stocked in the store compared to the prices of similar products in the competing stores in the area.

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The other two stores to be compared with located at Los Angeles include Century 21 Department store and Beacon’s Closet. Section 1: Relative price Comparison The three stores deal with extensive clothing varieties, shoes and jewelry stocking both men's and women wear. Nevertheless, for convenience, the focus of this project is on three products which are stocked the three stores at different prices. The cheaper the product, customers perceive it as of poor quality hence affecting the demand for such products negatively. Moreover, Los Angeles is an affluent city and hence customers are more concerned with the quality of products than the price provided the price is commensurate to the quality. Section 2: Analysis The three products compared have varying levels of quality which is demystified in the differential pricing strategy adopted by Bloomingdale’s and the neighboring competing stores namely Century 21 Department store and Beacon’s Closet.

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Nevertheless, pricing difference portrayed by the three companies is psychological because the products are in quality. For more clarification, it is paramount to demonstrate the quality specifications of each individual product to be able to understand the universal similarity in pricing across the three department stores. The handbag also has an imprint of parker logo at the front and at the back of the purse creating an attractive look while acting as a marketing tool for parker handbag. Marco Bicego Earrings Marco Bicego is a precious Jewelry which is made from gemstone. The average price of Marco Bicego Earrings is about $1297 in the selected stores in Los Angeles which presents a sample of the global market. The presence of gemstone in the earring is attributable to the price placed on the product.

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Section 3: Conclusion In Summary, it is clear that competition in the clothing industry is extremely high in Los Angeles which acts as the sample for our evaluation of price elasticities of demand. Therefore, if the manager increases the price of the products beyond a reasonable level, the customer may go back to the competitor stores particularly Beacon’s Closet and Century 21 Department store. Therefore, the manager can maintain a consistently higher price than the neighboring stores but the price should remain within the market rates. However, Bloomingdale’s should never reduce its prices below its competitors because that may send a wrong signal to the customers (Ewing & Elizabeth p. Bloomingdale’s is a market leader in the fashion industry, therefore, it should not try to reduce its prices below its competitors because such action would automatically paint the image of Bloomingdale’s negatively.

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