The Importance of Pricing Strategies in Market Structures
Running Head: THE IMPORTANCE OF PRICING STRAGETIES IN MARKET STRUCTURES
THE IMPORTANCE OF PRICING STRAGETIES IN MARKET STRUCTURES
Yvette Daniels
American Public University Systems
October 15, 2011
The importance of pricing strategies is different depending upon the type of market structure because each market structure has special components that affect the pricing schema and determination of output. Although the pricing strategies are different, it is highly important for a select market structure to choose the optimal pricing policy to insure that the firm is able to be successful and earn long-term profit. It also important to remember that pricing policies are subject to change considering that the business environment is ever changing as well; implementation is critical for a firm to remain stable within its industry and competitive. The importance of pricing strategies influence firms within its market structure to make the necessary adjustments to pricing depending upon the demand of it consumers, most importantly. According to Bobette Kyle (n.d.), “A higher or lower price can dramatically change both gross margins and sales volume” (para. 1). If a firm sets a price that is not appealing to the consumer then it has a higher chance of losing a sale or forcing a consumer to shop around for a substitute with a cheaper price tag. Ineffective pricing strategies may generate overstock which will then cause the profit to be stored in the warehouse until some type of action is taken to move the overstock through advertising or sale promotions (Kyle, n.d.). Pricing policies are critical depending on the type of market structure to avoid the business failure. The analysis of perfect competition, monopolistic competition, oligopoly, and monopoly market structures builds a the foundation on which pricing strategry is necessary to generate the optimal profit. Perfect competition market structures depict a market were single firms do not effect the price and
THE IMPORTANCE OF PRICING STRAGETIES IN MARKET STRUCTURES
Yvette Daniels
American Public University Systems
October 15, 2011
The importance of pricing strategies is different depending upon the type of market structure because each market structure has special components that affect the pricing schema and determination of output. Although the pricing strategies are different, it is highly important for a select market structure to choose the optimal pricing policy to insure that the firm is able to be successful and earn long-term profit. It also important to remember that pricing policies are subject to change considering that the business environment is ever changing as well; implementation is critical for a firm to remain stable within its industry and competitive. The importance of pricing strategies influence firms within its market structure to make the necessary adjustments to pricing depending upon the demand of it consumers, most importantly. According to Bobette Kyle (n.d.), “A higher or lower price can dramatically change both gross margins and sales volume” (para. 1). If a firm sets a price that is not appealing to the consumer then it has a higher chance of losing a sale or forcing a consumer to shop around for a substitute with a cheaper price tag. Ineffective pricing strategies may generate overstock which will then cause the profit to be stored in the warehouse until some type of action is taken to move the overstock through advertising or sale promotions (Kyle, n.d.). Pricing policies are critical depending on the type of market structure to avoid the business failure. The analysis of perfect competition, monopolistic competition, oligopoly, and monopoly market structures builds a the foundation on which pricing strategry is necessary to generate the optimal profit. Perfect competition market structures depict a market were single firms do not effect the price and