Week 10: More on pricing strategies

“In a world of imperfect information, what really determines price sensitivity is not the number and similarity of substitutes in the marketplace, but the number and similarity about which a typical consumer is aware.” (Nagle, 1984)

Hello and welcome back to my blog!

I came across this insightful quote from Thomas Nagle’s article on price discrimination, which I forgot to mention in an earlier post. Nagle’s article delves into both the legal and ethical considerations of pricing strategies, particularly focusing on price discrimination, which he describes as “selling the same physical product at different net prices to different customers.”

Legal Considerations:

Nagle first discusses antitrust laws and regulations and how price discrimination can violate these laws, that are designed to promote fair competition. He mentions the Robinson-Patman Act (1936) which prohibits charging different prices to different buyers for goods of the same grade and quality when it may harm competition. And claims that businesses must navigate these boundaries in order to avoid anti-competitive practices and potential lawsuits. Additionally, Nagle considers that different countries have varying standards for price discrimination, so global companies must comply with the legal frameworks in each market, because what is legal in one place may be illegal in another. I found this last point particularly interesting, because while I was partially aware of this fact I hadn’t researched it in-depth to look at the different legal frameworks for different countries/markets and will make sure to put some time aside this week in order to do so.

Ethical Considerations:

Nagle also discusses how price discrimination can lead to perceptions of unfair treatment if consumers feel they are charged differently based on location, purchase history, or socio-economic status. He talks about how clear and transparent pricing is crucial for maintaining trust, as hidden or obscure pricing practices can damage a company’s reputation and how price discrimination can create barriers for certain consumer groups, like higher prices for essential goods in low-income areas. Without transparency, consumers are less likely to trust producers when they sell their goods.

Additionally, this week I have made significant progress on my final deliverable and am basically done analysing the data from my survey and focus groups and am excited to share those results with you all next week.

Stay tuned for those updates next week and thank you for continuing to keep updated on my project!