The different market structures adopt different pricing strategies. A few pricing strategies help deterring the entry of competitors. They may also enhance competitive strength and force some of the competitors to go for exit promoting strategies. Various pricing strategies used by the firms in different market structures have different implications. A few pricing strategies are narrated below:
1) Price Lining StrategyIn this kind of pricing strategy, the firm fixes the price of one product in the total line of its products. For example, a firm producing dresses fixes up the price of particular size and price of rest of the sizes is then fixed on the basis of differences in sizes. This strategy eliminates those competitors who can not compete on price.
2) Limit Pricing Strategy
For this strategy, some sort of collusion is necessary among existing firms. In this, the firm may try to establish a price that reduces or eliminates the threat of entry of new firms into the industry in which the firm operates. Normally, oligopolist and firms operating in monopolistic competition go for this alternative.
For this strategy, some sort of collusion is necessary among existing firms. In this, the firm may try to establish a price that reduces or eliminates the threat of entry of new firms into the industry in which the firm operates. Normally, oligopolist and firms operating in monopolistic competition go for this alternative.
3) Stay-out Pricing Strategy
When a firm is not able to ascertain the price of the product, it introduces the product at a very high price. If it is not able to sell its product at this price, it would lower the price and go on lowering it till it meets the targeted sales. With the help of this strategy, the firm gets to know the maximum possible price it can charge from its customers. Monopolists experiment this strategy to have maximum profits. They are also not having any fear from competitors.
When a firm is not able to ascertain the price of the product, it introduces the product at a very high price. If it is not able to sell its product at this price, it would lower the price and go on lowering it till it meets the targeted sales. With the help of this strategy, the firm gets to know the maximum possible price it can charge from its customers. Monopolists experiment this strategy to have maximum profits. They are also not having any fear from competitors.
4) Psychological Pricing Strategy
Here, a firm fixes the price of its product in a manner which gives the impression of being low. For example, if the price of the product is fixed at Rs.199.99 rather than Rs. 200, it has psychological impact on consumers that price is in 100s rather than in 200s. This strategy may influence sales sometimes. In monopolistic competition, this alternative may give better results.
5) Skimming Price
This strategy could be used in a market with sufficiently large segment whose demand is relatively inelastic i.e. not sensitive to a high price. Another condition for this strategy is that high price is unlikely to invite competition and unit costs are relatively unaffected by small volume. The strategy implies skimming the cream by taking advantage of the target markets willingness to pay a high price. This strategy is discriminatory. It enhances the quality image. In monopolistic competition and monopoly, this pricing strategy gives results.
This strategy could be used in a market with sufficiently large segment whose demand is relatively inelastic i.e. not sensitive to a high price. Another condition for this strategy is that high price is unlikely to invite competition and unit costs are relatively unaffected by small volume. The strategy implies skimming the cream by taking advantage of the target markets willingness to pay a high price. This strategy is discriminatory. It enhances the quality image. In monopolistic competition and monopoly, this pricing strategy gives results.
6) Penetration PriceThis strategy requires a highly price sensitive market with high price elasticity. It is characterised by low price
which is likely to discourage competition. The policy is to charge low price so as to stimulate demand and capture large share of the market.There are various other strategies as well like sliding down the demand curve, premium pricing, fraction below competition, price discrimination and put-out pricing. A firm can use any of these strategies to compete in the market. Different strategies could be used at different time periods by the same firm as per the conditions.
to be honest is there any IIM Possible for average academic indivisual ?
i heard about IIM Calcutta and Lucknow being the pioneer who gets avg acads indivisuals with exceptional cat scores is it true?
They are highly biased against non engineers from cheap quality road side colleges.
They are highly biased against non engineers from cheap quality road side colleges.