Pricing Decisions questions

Document Type:Coursework

Subject Area:Economics

Document 1

Starting with a skimming price will set the brand’s quality at a higher end. Part b Considering that they will adopt a skimming pricing strategy, and that their initial opportunity cost isn’t present, the company will initially make economic profits. However, with time, there will be new entrants into this market due to the assumed high profits made. This can rationally reduce the economic benefits. However, with the skimming pricing strategy initially adopted, the company’s revenue will keep increasing assuming the deductions of both explicit and implicit costs are made. Part b My optimal bid will entail a price that maximizes the expected present value contributions against the overhead costs as well as profit. This is as by Douglas (2012) states.

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