Discuss each of the pricing strategies below What conditions

Discuss each of the pricing strategies below. What conditions are necessary to make each strategy successful in terms of increasing profits? Explain your answer. A local restaurant/bar offers discounted drinks during \"happy hour,\" from 5 to 6 PM on weeknights. The price Company X charges for its ink cartridges is nearly as much as it charges for a printer. Packs of 5 T-shirts cost $10 while an individual T-shirt costs $4. Coupons for specials at a local grocery store can be downloaded from an online site. Computer and appliance manufacturers promote service contracts. Microsoft Office includes several programs in one package.

Solution

Ans (A) A local restaurant/bar offers discounted drinks during “happy hour,” from 5 to 6 PM on weeknights. In this strategy, restaurant charges different prices for drinks during different time to enhance the revenue. This strategy is known as Third degree price discrimination. In this strategy, a producer charges higher price during the time where demand is inelastic and charge lower when demand is elastic. The necessary condition to make each strategy successful in terms of increasing profits is that demand for drinks during “happy hour” should be more elastic than during non-happy hours.

(B) The price Company X charges for its ink cartridges is nearly as much as it charges for a printer. In this strategy, Company charges nearly same price for both ink cartridges and printer. The company sells the printer (whose demand is more elastic) at a low price , in some case even below the cost. But after when consumer purchase it , the demand for ink become highly inelastic. So, the company charges higher price for ink and cover the losses occurred during printer sale. The necessary condition to make this strategy successful in terms of increasing profits is that there should not be any other competitor offering the ink at a lower price than company X.

(C) In this case, customers who would like to buy more than 1 tshirt of less than 5 tshirts cannot buy as it would become costlier. So, seller\'s strategy is to make a one product of many tshirts ans sell in the market in order to earn more profits.

(D) This means, that only those who have access to internet can download it. In this, seller is trying to sell limited coupons.