Examples of price fixing in the following topics:
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- Price fixing is a collusion between competitors in order to raise prices of a good or service, at the expense of competitive pricing.
- The intent of price fixing may be to push the price of a product as high as possible, leading to profits for all sellers but may also have the goal to fix, peg, discount , or stabilize prices.
- There are many things sellers may do during a price fix.
- These are all instances of price fixing.
- Because of this, price fixing is illegal in most developed countries.
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- Determining the cost of producing a product or service plays a vital role in most pricing decisions.
- Fixed costs are not permanently fixed - they will change over time - but are fixed in relation to the quantity of production for the relevant period.
- For pricing purposes, marketers generally take into account average fixed costs.
- Average fixed cost is a per-unit-of-output measure of fixed costs.
- Describe the characteristics of fixed costs and they relate to pricing decisions
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- Value-based pricing seeks to set prices primarily on the value perceived by customers rather than on the cost of the product or historical prices.
- Value-based pricing sets prices primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.
- How important is price?
- Some constraints are formal, such as government restrictions in respect to strategies like collusion and price-fixing.
- Examine the rationale behind value based pricing as a pricing tactic
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- Try to reduce variable costs (the price it pays for the tables by finding a new supplier)
- In the linear Cost-Volume-Profit Analysis model, the break-even point - in terms of Unit Sales (X) - can be directly computed in terms of Total Revenue (TR) and Total Costs (TC) as: where TFC is Total Fixed Costs, P is Unit Sale Price, and V is Unit Variable Cost.
- This quantity can then be used to derive the average fixed and variable costs, the sum of which can be used as the basis for markup pricing, et cetera.
- It assumes that fixed costs (FC) are constant.
- Analyze the concept of break even points relative to pricing decisions
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- A list price must be close to the maximum price that customers are prepared to pay and yield the maximum profit for the retailer.
- Other factors that should be considered when setting a list price include fixed order amounts, quantity breaks, promotion or sales campaigns, non-price costs (travel time to the store, wait time in the store, disagreeable elements), specific vendor quotes, the price prevailing on entry, shipment or invoice dates and the combination of multiple orders or lines.
- Pricing is a key variable in micro-economic price allocation theory and part of the four "P's-" of the marketing mix; pricing, product, promotion and place.
- The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends to the retailer.
- A good pricing strategy is one that strikes a balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).
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- Cost-based pricing is the act of pricing based on what it costs a company to make a product.
- Cost-based pricing involves setting a price such that:
- Cost-based pricing is included in what is considered the "3 C's" of pricing.
- Distributing fixed costs can be difficult, since products affect fixed costs in different ways.
- Describe cost based pricing as it relates to general pricing strategies
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- These include: price skimming, price discrimination, psychological pricing, bundle pricing, penetration pricing, and value-based pricing.
- Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.
- Product heterogeneity, market frictions, or high fixed costs (which make marginal-cost pricing unsustainable in the long run) can allow for some degree of differential pricing to different consumers, even in fully competitive retail or industrial markets.
- Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
- By definition, long term prices based on value-based pricing are always higher or equal to the prices derived from cost-based pricing.
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- The total cost has two components: total variable cost and total fixed cost.
- In cost-plus pricing, we use quantity to calculate price, but price is the determinant of quantity.
- A cost-plus price will equal average variable costs plus average fixed costs plus markup per unit.
- The total average cost for a product is determined by dividing the total fixed costs (TFC) and total variable costs (TVC) by the quantity of the product produced, and then summing these together.
- Examine the rationale behind the use of markup pricing as a general pricing strategy
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- High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.
- High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors.
- The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
- High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms.
- However, in these industries one or two firms will not provide discounts and works on fixed rate of earnings.
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- Price discrimination also occurs when the same price is charged for goods with different supply costs.
- Price discrimination's effects on social efficiency are unclear; typically such behavior leads to lower prices for some consumers and higher prices for others.
- In the real world, product heterogeneity, market frictions and moderate fixed costs allow for a level of price description in many markets.
- Price varies according to demand: larger quantities are available at a lower unit price.
- Construct the concept of price discrimination relative to legal concerns in pricing