Session 7: Capturing Value

Question 1

Pricing is a ___

Answer 1

Reflection of a firms attempt to capture value

Question 2

3 pricing methods are

Answer 2

Cost oriented
Competition oriented
Customer oriented

Question 3

True economic value

Answer 3

Cost of the next best alternative plus performance differential

Question 4

Must consider when thinking about pricing

Answer 4

Constant vs diminishing costs

Question 5

Price elasticity

Answer 5

Change in quantity divided by change in price

Question 6

E= 0

Answer 6

Price won’t change quantity

Question 7

E<1

Answer 7

Inelastic - quantity won’t change as much as price

Question 8

E=1

Answer 8

Unit elastic - change in quantity = change in price

Question 9

E>1

Answer 9

Elastic - change in quantity > change in price

Question 10

Veblen goods

Answer 10

Goods that signify status

Question 11

Shared costs

Answer 11

If someone else is footing the bill you are less price sensitive

Question 12

Bundle

Answer 12

If foods are bundled they will be less price sensitive than they would be if the same food was sold independently

Question 13

Ease of comparison

Answer 13

Ability to check between comparisons increases price sensitivity

Question 14

Necessity

Answer 14

If someone needs something they are less price sensitive

Question 15

Ability to carry inventory

Answer 15

If you are able to buy in bulk you could get cheaper prices as you are sharing the inventory cost

Question 16

Habit

Answer 16

Always going to a specific place diminishes comp capability and therefore price sensitivity

Question 17

Prospect theory

Answer 17

People make choices based on expected value

Question 18

Prospect theory implications

Answer 18

Red point dependence

Diminished sensitivity

Loss aversion