MGAC50H3 Chapter 5: Pricing Policy Study Guide
Document Summary
Pricing policy: policy that determines how a company varies its prices. Consumer purchase behavior is influenced by expectations that the seller has created. People don"t buy a discounted product and wait for it to become even cheaper. Thus to get people to buy, companies are forced to lower the price later (which matches with what consumers expected). Companies can set a pricing policy that offer 30 day price protection so that consumers can receive a credit for the difference between the regular and the sale price within 30 days of purchase. This way more people will buy the discounted instead of waiting for it to go on sale, and the company will not have to discount the price further later. Behavior of sellers is driven by expectations inferred from past experience. Sales go up a lot during discount periods, and fall during weeks before discounting.
