SMG MK 323 Lecture Notes - Lecture 15: Price Fixing, Predatory Pricing, Experience Curve Effects
Document Summary
15. 1 cost-based methods (considerations for setting price strategies) Cost-based pricing methods = determine the final price to charge by starting with the cost. Relevant costs (fixed, variable, overhead) and a profit are added. Then, the total amount is divided by the total demand to arrive at a cost-plus price. Ex: fc = 200k, vc = 100k, # units = 30k. If desired markup is 20%, we multiply by 1. 20 = . The process assumes that these costs will not vary much for different levels of production. If they do, price might need to be raised or lowered according to the production level. 15. 2 competition-based methods (considerations for setting price strategies) Most firms still know that consumers compare the prices of their products with the different product/price combinations that competitors offer. Competition-based pricing method, they may set their prices to reflect the way they want consumers to interpret their own prices relative to competitors" offerings.
