Apple Price Cut Case

2408 Words Jun 23rd, 2011 10 Pages
Apple Price Cut Case

1. To what extent the iPhone pricing strategy is similar to the iPod pricing strategy? How do you explain that the iPod price cut did not lead to such a level of customers’ protest?

Answer: Both iPhone and iPod have experienced a large amount of price cut in their product lifecycle. In this document, we can find that iPod was launched in October 2001. Tough relatively high priced for an MP3 player, it was hugely demanded and remains popular till date though there was a price slash in 2005. Similar to the price cut of the iPod, two months after the launch of the iPhone, Apple lowered the price by 200 USD.

However, regarding the price strategy, a big difference between two products is the timing of price
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We can make the conclusion that regarding to the income elasticity, a decrease of price of iPhone has a positive impact on its total revenue. 3. Based on the information provided in the case would you say that the market for smartphone is closer to monopoly or to monopolistic competition? Justify.

Answer: Yes, base on the information provided in the case, I regard the smartphone industry as a monopolistic competition. Monopolistic competition is a form of imperfect competition where many competing producers sell products that are differentiated from one another. Smartphone industry has following characteristics: * There are several producers like Apple, Blackberry, Nokia, Motorola etc., and many consumers in the market, but no company can total control over the market price. * Consumers perceive that there are non-price differences among the competitors ' products. * There are few barriers to entry and exit. * Producers have a degree of control over price.

4. Is the price cut decided by Apple two months after iPhone initial launch consistent with the smartphone market structure described above?

Answer: Yes, the performance of iPhone is consistent with the smartphone market structure.

Firstly, the MC firms sell products that have real or perceived non-price differences. However, the differences are not so great as to eliminate other goods as substitutes. Technically, the cross price elasticity of demand

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