TOPIC: PRICE DISCRIMINATION http://www.hcs.harvard.edu/hghr/online/price-discrimination-method/ In a market there can be many types of pricing strategies. Some of these include: average pricing, marginal cost pricing, penetration pricing, skimming price, price discrimination, cost plus pricing, kinked price among others. Most of these strategies are based on the aim of profit maximisation. The pricing strategy differs under the different market structures like perfect competition, monopolistic competition, oligopoly and monopoly. Price discrimination is a common pricing strategy used by monopolist. It involves charging consumers different prices for the same good. It is only possible with a monopolist, as we need a single seller to sell to …show more content…
Rates are cheaper at night compared to day time. This is effective as consumers cant store electricity in the nite when it is cheaper and use it in the morning. The costs of storing are greater than the price differential, which makes it irrational to store at night.
Some phone companies charge on the basis of usage. The first 100 minutes of talk time is more costly. The next 200 minutes are cheaper. This means that the same consumer is charged a different price per minute depending on total usage. This is often done to encourage greater use as the sunk costs and fixed of providing a phone connection are high. The only way to recover costs is to earn higher revenues through greater usage of talk time
The essential requirement for effective price discrimination is
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We can look at this from 2 perspectives. One is the pharma company that invests billions into development of a drug that takes many long years to come into the market. Once approved the company wants to recover its costs of research and development within the patented years. ‘A recent study conducted by the Centre for Medicine Research (CMR) on 16 pharmaceutical companies that account for 60% of the world’s research and development spending estimates that Phase II trial success rates have fallen by 10 percentage points to just 18% from 2006 to 2009. Furthermore, only half of drugs make it through Phase III trials. All this is to say that drug development is a high-risk, high-reward
Doctor Tristram Engelhardt, an American philosopher, argues that the importance of these profits is to acquire resources and to productively make new discoveries. These profits will secure recourses for these companies and that with the extra money, these pharmaceutical companies can be more innovative. With these profits, more effort will be put in to decreasing morbidity and mortality risks. According to Engelhardt, if these companies decrease profits, the amount of resources and energies available to be innovative will also decrease, leading to more risks. However, Stan Frinkelstein and Peter Temin states that we can eliminate the link between drug prices and drug discovery by developing the Drug Development Corporation, that will solve this problem, as mention in the last
Lehman, Bruce. 2003. “The Pharmaceutical Industry and the Patent System”. International Intellectual Property Institute. Pages 1-14.
Pharmaceuticals are arguably one of the most contentious of all goods and services traded in the market. While medicines are as much a necessity as foods and water, they require more technical expertise and official approbation in the manufacture. Above all, they carry a moral weight that most market products do not (The Economist, 2014). This idea of moral can be linked to the recurring debate over whether a good health (which is represented by medicines, in this case) should be considered a basic human right, or just a normal commodity. A large portion of such controversy actually lies in an existence of drug patents: should we promote for longer-lasting patents or should we have their duration shortened?
Economic Injustice in America "Class is for European democracies or something else--it isn't for the United States of America. We are not going to be divided by class." -George Bush, the forty-first President of the United States (Kalra 1) The United States of America was founded on the basis of a "classless society of equals," committed to eliminating the past injustices imposed on them by Great Britain.
In conclusion, when a company introduces a new product into the price-sensitive market, the competitors are expected to move in the market quickly. It is better for the company to apply penetration-pricing strategy, in order to obtain a large market share in a short period and also discourage competitors who plan on entering the market.
This fact validates the incentive pharmaceutical companies have to get a patent and acquire more power. Pfizer encourages R&D because of the incentives and a desire to obtain patents to receive more profit. Pfizer has to promote itself to be successful, creating a brand image that consumers will trust. If the company can advertise successfully, more consumers will purchase their products. Pfizer must also be generating products efficiently in order to save and use existing resources, while manufacturing their products at low costs to stay competitive....
It is determined by the cost of production, the segment aimed, the capability of the market to recompense, supply and demand, and all other direct and indirect factors. There are more than a few kinds of pricing strategies, each corresponded with the total business plan (Yoo, Donthu et al. 2000). Pricing could also be used to discriminate different brands of product, and to enhance the appearance of a particular company (Kotler and Levy 1969). In this case, Amazon is quite competitive in term of its prices, and has strategic approaches of staying up front of its market competitors (Chevalier and Goolsbee 2003). For instance, when a person is considering to purchase a particular book, Amazon has options whether that individual would prefer a new copy or a used one, and it also presents the prices for these books together with their conditions. A further proposal is to pay to create a premium account, where the items purchased would be delivered quicker. Amazon’s competitive prices also results from the minimum number yet well skilled employees, thus the customers are actually benefitting from the reduced cost of overheads, hence, the low prices of Amazon
Imagine being discriminated against because of a preference or something that is unable to be changed. What would that feel like? Discrimination is happening all around the world, with all different kinds of people. People can be discriminated against by all types of things, such as age, sex, race, religion, sexuality, height, etc. I believe that discrimination is becoming a bigger cause in other countries as the United States (US) and that it should be addressed more than it is being. There are many types of discrimination going on throughout various places but, the three main ones happening are sexuality discrimination, race discrimination, and religious discrimination. The biggest one accruing right now is sexuality discrimination.
For a drug to get to market it must go through several stages of research and development (Abbott and Vernon). Starting with discovery research, preclinical testing on animals, three phases of clinical trials on humans, and finally FDA (Food and Drug Administration) approval (Abbott and Vernon). Out of several thousands of drugs only a few will make it to the FDA approval stage (Abbott and Vernon). Testing is a highly regulated, time consuming, and expensive process. From beginning to end the process can take fifteen years and less than one of five compounds will make it to market where it is still not guaranteed to succeed (Abbott and
Price gouging is increasing the price of a product during crisis or disaster. The price is increased due to temporal increase in demand while supply remains constrained. In many jurisdictions, price gauging is widely considered as immoral and is illegal. However, from a market point of view, price gouging is a correct outcome of an efficient market.
The competition and consumer act aims to discourage price discrimination in the business environment if the discrimination could substantially reduce competition. An example of price discrimination would be Apple with the distribution of IPhone 5c around the world, the prices vary from $500-$1,500(local currency). The IPhone 5c is less-profitable for Apple but still the price range has a big gap e.g., in Singapore the iPhone costs $948, but in the UK it costs $529 . There are three types of price discrimination (first degree, second degree and third degree) and they all discriminate differently. The price discrimination in business will increase revenue, they will attract more consumers and will enable companies to stay in business. The consequences for price discrimination is that the manufacture/business will get sued by consumers for price discrimination especially when paying higher prices, decline in consumer surplus, there may be administrative costs of separating the markets etc. However, Price discrimination has a lot of impacts on consumers and business owner 's around the world but most importantly it affects people that have been discriminated over the price for the same
Besides, they approach by producing innovative product with a wide range of smartphone with various operating systems, shapes, sizes and prices to their customers with attractive prices. With comparative items function, Samsung products cost is constantly lower from 10-15%. Samsung has utilized its interior resources and applied to their production system, as a result, this will decrease the cost of production and offer more option to the customers. Diminishing the cost is another strategy for Samsung to attract customer attention and to increase the sales volume. Pricing strategies consist of several different types such as price skimming, competitive pricing, penetration pricing, discount pricing and product life cycle. Samsung utilize different pricing strategies to different product. Firstly, price skimming. It is higher price had been set ahead, before competitors penetrate the market. Therefore, Samsung applies pricing strategy in selling their products, for example hand phone. Once the company releases new model, they will decrease the price of the previous model to compete with another competitor. Second, Competitive in pricing. Samsung utilize a competitive pricing strategy when other organisations offer similar products and services. Samsung set their total cost of a
Other companies cannot replicate the drug and therefore they are forced to either wait until the patent expires or they must find an alternative drug that carries out the same purpose.... ... middle of paper ... ... It is clear to see that there are many pros and cons to patents in the pharmaceutical industry.
The second market structure is a monopolistic competition. The conditions of this market are similar as for perfect competition except the product is not homogenous it is differentiated; thus having control over its price. (Nellis and Parker, 1997). There are many firms and freedom of entry into the industry, firms are price makers and are faced with a downward sloping demand curve as well as profit maximizers. Examples include; restaurant businesses, hotels and pubs, specialist retailing (builders) and consumer services (Sloman, 2013).
...e enough because the company has chosen the best possible way to increase the company performance. The pricing strategy is the company’s best strategy from all because it affected the sales revenue a lot. Although fluctuating the price is quite risky for a business since the customers might order from other companies if the company doesn’t do it properly, but XXX Company manage to done it well so far. The effectiveness might also be seen by the average of sales revenue between January to August from 2011 to 2013.