direct and indirect price discrimination
The competition is ever-growing due to the increased number of business organizations being established today (Rowe, 2019). This trend has pushed organizations to become more innovative so that they can deal with the competition and remain successful in the long run. Additionally, some organizations have been using different pricing strategies and methods so that they can attract as many customers as possible. This week I gained very relevant and helpful knowledge and insights concerning issues involving direct and indirect price discrimination and lastly about strategic games.
Direct Price Discrimination-In this, there are several essential things that I learned and can be applied to solve real organizational problems (Froeb, McCann, Shor & Ward, 2017). First is that direct price discrimination refers to a process where an organization tries to set different prices on their goods/services for two groups. An organization usually does this practice to increase its profits since when different prices are charged on the same goods, then the organization maximizes its sales and margin. To do this effectively, the organization needs to identify the two groups and know about their buying power.
Another critical concept in this is that as the elasticity between the two groups increases, the higher the chances the organization has to design a more profitable price discrimination model (Froeb, McCann, Shor & Ward, 2017). Additionally, the organization needs to ensure that they have reliable methods of preventing arbitrage or resale of products sold at lower prices while doing price discrimination since this can negatively affect their profitability. Another critical concept worth of mu understanding in this is that about the Robinson Patman Act that prohibits business organizations from giving a price discount when selling goods to other organizations. The act was primarily designed to protect independent retailers from chain store competition.
Indirect Price discrimination-This is the second concept that I learned about this week. In this, the organization aims to do price discrimination, but it is unable to identify the various groups in the market (Rowe, 2019). In this, therefore, the organization uses different strategies to identify high and low-value consumers. Among the methods used to determine the various groups include the following. First is that an organization can come up with different versions of a similar product.
A good example is where a software company designs different software and, through them, can identify and differentiate between high and low-value consumers through their buying preferences. Secondly, the organization can look at the volumes purchased by consumers and differences between high and low-value consumers. Lastly is metering a method used by organizations to identify high-value consumers by looking at how intensely they use a specific product.
Strategic games-This is the last concept this week that was important and worth my understanding (Froeb, McCann, Shor & Ward, 2017). Strategic games involve an organization using different strategies to beat the competition and become successful. Through these games, the organizations in the industry know how to respond to anything that their competitors are doing to overcome them. Another critical concept in this is the Nash equilibrium. The Nash equilibrium refers to a pair of strategies where each organization has strategies to respond to any situation correctly. The strategic games have been used by organizations and individuals to solve different situations and attain reliable solutions.