14.5: Pricing Strategy Flashcards
What is international price discrimination?
International price discrimination occurs when consumers in different countries are charged different prices for the same product.
It involves charging what the market will bear, which can differ based on competition levels and the market’s ability to pay.
What are the necessary conditions for profitable price discrimination?
Profitable price discrimination requires that national markets be kept separate to prevent arbitrage, and it relies on different price elasticities of demand in different countries.
How does price elasticity affect price discrimination?
Price discrimination is more feasible in markets where demand is inelastic, meaning a large change in price produces only a small change in demand.
What is strategic pricing and what are its three aspects?
Strategic pricing refers to pricing strategies that consider market competition and consumer behavior, and includes
predatory pricing,
multipoint pricing,
and experience curve pricing.
What is predatory pricing?
Predatory pricing is setting low prices to drive competitors out of the market, with the intent to raise prices later once the competition has been reduced.
What is multipoint pricing?
Multipoint pricing considers the global competitive landscape, where pricing decisions in one market may affect a firm’s competitiveness in another market, often leading to price wars in multiple markets.
What is experience curve pricing?
Experience curve pricing involves setting low prices globally to build market share and move down the experience curve quickly, gaining cost advantages over competitors.
What regulatory factors can influence a firm’s international pricing strategy?
International pricing strategies can be affected by government-mandated price controls, anti-dumping regulations, and competition policies that restrict the ability to set prices freely across different markets.
