Pricing Strategies For Companies With Market Power

828 Words Aug 14th, 2015 4 Pages
Pricing Strategies For Firms With Market Power
Google, Apple, Nike and Netflix are all examples of successful large firms that have gained an edge against their competition and developed high level of market power. So what is market power? Market Power is the “Extent to which a firm can influence the price of an item by exercising control over its demand, supply, or both,” (“What is market power” 2015, n.d., p.1). These firms are examples of firms that have been able to strongly influence how they price their products through various pricing strategies. What is a pricing strategy? A pricing strategies are “activities aimed at finding a product’s optimum price, typically including overall marketing objectives, consumer demand, product attributes, competitors ' pricing, and market and economic trends,” (“What is pricing strategy” 2015, n.d., p.1). Firms with market power use different price strategies to maintain their edge against competition. This paper will discuss the pricing strategies used by firms with market power and the strengths, weaknesses and ethical concerns of pursuing certain types of pricing strategies.
Firms with market power can use one of three types of price discrimination to influence pricing on their products. What is the price discrimination? According to Baye and Prince (2014), price discrimination is “ the practice of charging different prices to consumers for the same good or service,” (p.417). Pricing discrimination is how firms determine how to…
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