How to Fight a Price War

The principal microeconomic issue at work is supply and demand. The author invokes a number of economic theorists (both liberal and conservative) who endorse price gouging out of a belief that it is simply the natural manifestation of a capitalist society that relies on supply and demand. There is a belief that preventing price gouging allows consumers to act with little consequence for their actions. According to this line of thinking, a business is well within its rights to raise prices because they should respond to public demand; at other times, there is little demand, so they are wise to take advantage when there is significant demand. Moreover, economic theorists have argued that price-gouging is positive because it makes people question whether the item they are considering purchasing

Price Gouging is illegal, however it’s a common practice during a crisis or shortly after it takes place such as a hurricane, floods, or tornadoes. What usually happens is the seller of a good greatly increases the prices of certain items that are in high demand because of the crisis that has taken place. For example, following a hurricane, goods as in wood, paint, bottled

Thirdly, option is to strategically adjust the prices of their products because consumers are often very price sensitive. By doing so the company can either create more value that defines the quality and quantity of the product.

The idea of price gouging can have many different perspectives on it, and is very controversial. Price gouging is when a seller spikes their prices of goods, services, or other purchase products to a level higher than reasonable. Ethically, I do agree with the fact that merchants shouldn’t sky rocket their product prices during a state of emergency—price gouging.

Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing

Price fixing occurs when competitors of the same industry agree to raise, lower, or stabilize the prices of their products. This is classified as a horizontal agreement because it involves competitors. They do this in order to manipulate prices to gain an unfair advantage. The government has a law in place for this issue called the Sherman Anti-Trust Act of 1890. This law requires each company to set its prices and other terms on its own. Generally, the consumer expects the price of a product to be determined by the current supply and demand. This is not the case with price fixing, as competitors use this tactic to skew the market. Price fixing is illegal and difficult to catch, but there are signs that could be helpful in determining if price fixing is in play. If competitors have

brand image of the company same time it will initiate a price war. It will not benefit the

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

Imagen the price of something such as a case of water that normally sells for $10-$12. Now imgen that same package of water selling for $99. Hard to believe? It’s a real thing that happens to people in the world. This real world thing is called price gouging and it happens more times than you would think. Price gouging happens in times of need when people run out of supplies such as food, water and other needs price gougers buy items for low prices then resell them for much more than what there worth. They pretty much steal from the people they sell items to by giving them an unfair price. Around 37 states have already put laws against price gouging bit there are still 13 states that don’t have laws to counter it. In some cases price

pricing closely, as being out of step with the market can cause dramatic market share changes in a

 In general, manager’s look at competition has been too narrow. There is a broad set of competitors that need to be looked at, which are described in “The Five Competitive Forces That Shape Strategy” by Michael E. Porter. The model explains that there are several other forces in the competition for profits that the strategist should be aware of when forming a stagey. Those forces determine the profitability of the industry and are the most important to look at when you are forming a strategy. These five forces are are the “industry structure” model which contain: New Entrants, Suppliers, Buyers, Substitutes, and Existing Competitors.

The bargaining power of buyers: Buyers have more control over an industry than one might think. They want lower prices, higher quality, and more services and this makes the competitors play against each other. The profitability suffers as each competitor tries to make their product or service better (Dess, p. 54). McDonald’s has a $1.00 menu as does Burger King and Wendy’s. Each time I go into either of them there is a better item added to the $1.00 menu. For instance, McDonald’s has the scrumptious Double Cheeseburger and Wendy’s has the

Therefore, all firms in the industry would suffer from a sharp fall in profits as they continuously cut prices to compete with each other. Eventually, prices will have to rise again to restore profitability and the firm that started the price war could have lost market share. Therefore firms want to avoid price competition as all firms will lose out in the long term due to reduced profits. So there is an incentive for firms to form a price agreement in order to reduce uncertainty.

Competitions are ubiquitous. It may be in the form of us seeking a promotion at work, company competing for bigger market share. In fact, humans more often than not ,seek to achieve a superior position relative to others in a variety of contexts (Garcia, Tor and Schiff, 2013). Simply put, an undertaking with an aim of establishing gain by hindering the competitive edge of the rival party involved. In economic sense, in a marketplace, there are buyers and sellers for a product existing at variance, which would allow the price of products to change to counter the change in supply and demand. In todays times almost every product has a substitute alternative, hence, a buyer would have the convenience of switching to the cheaper alternative if price of a product becomes unaffordable for them. Hence, the buyers have relative influence on the price of the products. However in some industries there are only a few supplier of the products and services, due to the absence of substitutes, which reduces the bargaining power of the consumers on the price of goods, due to the producers having absolute power over the pricing of the goods.

Price interacts with all other elements of the marketing mix to determine the effectiveness of each and of the whole. The objectives that guide pricing strategy should be a subset of the objectives that guide overall marketing strategy. Thus, it is probably wrong to view price as an independent element of marketing strategy or to assert that price, by itself, is a central element in the marketing mix.” (Webster, 1979)