Managerial Economic and Strategy Sample Essay
DETAILS
MANAGERIAL ECONOMIC STRATEGIES
I have a project that is due soon. The course name is Managerial Economic and Strategy. The instructor asked us to write anything on
PRICE DISCRIMINATION TWO PAGES
CONSUMER CHOICE TWO PAGES
RELATING TO THE COURSE MENTIONED ABOVE. THANKS
Introduction
Price Discrimination
There is no universal definition as to what price discrimination is. However, in simple terms, price discrimination can be defined as the practice of charging a different price to different groups of individuals for the same goods or services (Liu and Serfes, 2013). In price discrimination, the seller charges different customers the maximum price that they are willing to pay. There are three types of price discrimination worth noting as subsequently highlighted: Managerial Economic and Strategy Sample Essay
First degree price discrimination
According to Mahmood (2014), first degree price discrimination, also known as perfect price discrimination, happens when a given firm charges a completely different price for every unit that gets consumed. In this scenario, the firm is able to charge maximum possible price for every unit which in turn enables the firm to capture the entire consumer surplus for itself. However, scholars argue that in practice, first-degree price discrimination is very rare. It is not practical enough to find firms pricing down demands in order to capture all consumer surplus.
Second degree price discrimination
Here, price discrimination happens when sellers go ahead and charge a different price for different quantities, such as quantity discounts in case of bulk purchases (Czerny and Zhang, 2015). In short, the price of a given good or service varies depending on the quantity demanded by the buyer. Managerial Economic and Strategy Sample Essay
Third degree
Third-degree price discrimination, according to Czerny and Zhang (2015) occurs when the practice changes from charging a different form of price to different consumer groups. A typical example can be seen in an event whereby rail and tube travelers get subdivided into commuter and casual travelers or cinema goers get divided into either adults or children. Here the practice of splitting the market into peak and off peak use is common and mainly happens or mainly occurs with electricity, gas, parking charges, telephone supply and gym membership. It is argued that third degree price discrimination is the most common type of all (Czerny and Zhang, 2015). More importantly, though, price discrimination does not just happen on its own. There are conditions that must be necessary for it to happen.
Conditions necessary for successful price discrimination
Successful price discrimination can occur when certain conditions are practical or have been met. First, the company must be in a situation where it is able to identify different market segments such as industrial or domestic users (Mahmood, 2014). Without such, price discrimination may not be achievable.
Secondly, for a price discrimination strategy to be termed as successful, different segments in the market must have varying price elasticities. The third condition is that markets have to be kept separate, either by physical distance, nature of use, such as the schools edition of Microsoft Office that is only available at educational institutions at a lower price and time (Borland and Howsen, 2016).
The fourth condition that must exist for successful price discrimination is that at no time should there be seepage between the two markets. This means that a consumer cannot go ahead and purchase goods or services at a low price in the elastic sub-market and go ahead to re-sell the same commodities to other consumers in inelastic sub-markets at a much higher price (Liu and Serfes, 2013). Managerial Economic and Strategy Sample Essay
Lastly, scholars such as Borland and Howsen (2016) argue that for price discrimination to occur, the firm must possess some degree of monopoly power in order to exercise their control in the market.
Conclusion
In conclusion, the price of charging different customers different prices for the same goods or services purchased is not a new phenomenon. Firms have been doing it for long though at varying degrees. Of importance, such discrimination strategies may not be successful if certain conditions such as elasticity and others do not exist in the market.
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Consumer Choice
Consumer choice can be defined as the decisions that consumers have to make regarding to certain products and services based on whether they will make purchases or not. A study of consumer choice behavior involves examining how consumers decide which services or products to consume or purchase over time (Beyari and Abareshi, 2016). Others have defined consumer choice as the range of competing services or products from which consumers can make their choices. Managerial Economic and Strategy Sample Essay
Consumer choice can also be defined as buyer behavior (Xin, Gerald and Terry, 2012). Of importance, a consumer?s choice or buying behavior of consumers are mainly influenced by a number of factors that make consumers develop brand or product preferences and for marketers, understanding such factors are essential in their marketing mix strategies as they can learn what appeals more to consumers hence working to meet such conditions (Khan and Azam, 2016).
Factors that influence consumer choice
A number of scholars argue that buying behavior is influenced by a number of factors. The following are some of the factors that influence consumer choice of certain products or services.
Cultural factors
Here, cultural factors include a given consumer?s aspects of culture, subculture and social class. Cultural factors are often inherent in people?s values and belief systems hence having an impact on the overall decision making process. For instance, if one presents pork and beef to a person of Muslim faith, the Muslim individual will easily choose beef as opposed to pork based on cultural beliefs that pig meat is dirty (Khan and Azam, 2016).
Social factors
Social factors also influence consumer choices. Social factors include groups such as reference groups, member groups, aspirational groups among others who may influence each other into buying certain goods or not. Other social factors include family, role and status or other outside forces coming from other people that influence consumers to make purchase decisions either directly or indirectly (Chen and Duan, 2016). Managerial Economic and Strategy Sample Essay
Personal factors
Here, personal factors include a number of variables such as age, occupation, economic circumstances, and aspects of lifestyle such as demographics, activities, opinions and interests. Others include personality aspects and aspects of self concept (Xin, Gerald and Terry, 2012). In other words, all these may explain why people?s preferences change as their ?situation? changes.
Psychological factors
Consumer choices are also influenced by psychological factors including aspects such as motivation, learning, perception, attitudes and beliefs. Perceptions about a given product or beliefs that people perceive to receive from certain goods or services may be some of the factors that influence consumers to purchase certain goods or services (Chen and Duan, 2016).
Consumer choice process
According to Chen and Duan (2016), before making any purchase on a given product or service, the consumer goes through a number of stages. There are five stages that consumers have to go through. First, there is problem recognition. Here, consumers realize that they are missing a certain good or service hence the need to purchase it. Secondly, there is information search where the buyer goes on to find more information on the specifics of a given product or service. The third stage is evaluation of alternatives and here, the consumer goes on to establish if better choices to the same product exist. The fourth stage is the purchase decision where an actual purchase is made for purposes of consumption before moving to the last stage which is post purchase behavior. Post purchase behavior is characterized by a consumer taking an additional action based on either their satisfaction or dissatisfaction of a product or service (Beyari and Abareshi, 2016). Managerial Economic and Strategy Sample Essay
Conclusion
To conclude, consumer choices are decisions that consumers have to undergo before making a purchase decision and they are influenced by a host of factors as discussed above. Despite being influenced, consumers have to go through the aforementioned stages before an actual purchase is made.
References
Beyari, H., & Abareshi, A. (2016). The Conceptual Framework of the Factors Influencing Consumer Satisfaction in Social Commerce. Journal Of Developing Areas, 50365-376.
Borland, M., & Howsen, R. (2016). A problem with the course presentation of the single-price alternative to 3rd-degree price discrimination. Economic Issues, 21(1), 87-98.
Chen, X., & Duan, H. (2016). A meta-analysis of consumer irrational purchase behavior based on Howard-Sheth mode. Journal Of Business & Retail Management Research, 10(3), 69-80.
Czerny, A. I., & Zhang, A. (2015). Third-degree price discrimination in the presence of congestion externality. Canadian Journal Of Economics, 48(4), 1430-1455. Managerial Economic and Strategy Sample Essay
Khan, A., & Azam, M. K. (2016). Factors Influencing Halal Products Purchase Intention in India: Preliminary Investigation. IUP Journal Of Marketing Management, 15(1), 20-35.
Liu, Q., & Serfes, K. (2013). Price Discrimination in Two-Sided Markets. Journal Of Economics & Management Strategy, 22(4), 768-786.
Mahmood, A. (2014). How do customer characteristics impact behavior-based price discrimination? An experimental investigation. Journal Of Strategic Marketing, 22(6), 530-547.
Xin, G., Gerald, H., & Terry, E. (2012). What to Say When: Influencing Consumer Choice by Delaying the Presentation of Favorable Information. Journal Of Consumer Research, 38(6), 1004-1021. Managerial Economic and Strategy Sample Essay
