Case (1) Exxonmobil
marketing Management
Case (1) ExxonMobil
1. Which, if any, of the pricing strategies discussed in the chapter are being applied by ExxonMobil and other oil companies? Could they adopt any other strategies?
ExxonMobil and other companies in the retail oil industry are working in monopolistic competitive market. The market demand in oil industry is inelastic in short run and all the companies have their own share in oil demand. In the monopolistic competition like in the case of ExxonMobil and other retail oil companies, prices are usually set by the forces of demand and supply prevail in the market. However, companies in this situation usually try to gain maximum profits and they also want that all of their products would be sold out. In fact, ExxonMobil makes a differentiation strategy. It is because ExxonMobil has to make segmentation of its consumers on the basis of their location. Prices of ExxonMobil are also determined by considering time behavior of the petroleum products. This pricing strategy also suits to other oil companies because those are also working in the monopolistic competitive environment and these companies also want to make maximum profit in the environment where demand and supply forces are also effecting on the determination of prices (Bajariand and Benkard, 2005).
2. Discuss buyer reactions to changes in the gas prices. How can you explain these reactions?
Gas prices are largely dependent on the forces of supply and demand. It is because this petroleum product market is relatively inelastic in its demand. Buyers have to purchase the gasoline products whoever the price would be in the market. However, the socio-economic response of the buyers is not as much favorable. It is because, in present times, whole the life of a person revolves around the transportation and transportation cost. Whole the economy goes slow if there is an excessive increase in gas prices. It
Case (1) ExxonMobil
1. Which, if any, of the pricing strategies discussed in the chapter are being applied by ExxonMobil and other oil companies? Could they adopt any other strategies?
ExxonMobil and other companies in the retail oil industry are working in monopolistic competitive market. The market demand in oil industry is inelastic in short run and all the companies have their own share in oil demand. In the monopolistic competition like in the case of ExxonMobil and other retail oil companies, prices are usually set by the forces of demand and supply prevail in the market. However, companies in this situation usually try to gain maximum profits and they also want that all of their products would be sold out. In fact, ExxonMobil makes a differentiation strategy. It is because ExxonMobil has to make segmentation of its consumers on the basis of their location. Prices of ExxonMobil are also determined by considering time behavior of the petroleum products. This pricing strategy also suits to other oil companies because those are also working in the monopolistic competitive environment and these companies also want to make maximum profit in the environment where demand and supply forces are also effecting on the determination of prices (Bajariand and Benkard, 2005).
2. Discuss buyer reactions to changes in the gas prices. How can you explain these reactions?
Gas prices are largely dependent on the forces of supply and demand. It is because this petroleum product market is relatively inelastic in its demand. Buyers have to purchase the gasoline products whoever the price would be in the market. However, the socio-economic response of the buyers is not as much favorable. It is because, in present times, whole the life of a person revolves around the transportation and transportation cost. Whole the economy goes slow if there is an excessive increase in gas prices. It
References: Bajari, P., and Benkard, L.(2005) “Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach,” Journal of Political Economy, 113 (6), 1239–1276. Barron, J. M., Taylor, B. A., and Umbeck, J. R.(2001) “New evidence on price discrimination and retail configuration,” Applied Economics Letters, 8(2), Blumberg, G. P. (2002) “DRIVING My Gasoline Beats Yours (Doesn’t It?),” http://query.nytimes.com/gst/fullpage.html?sec=travel&res= Chamberlin, E. (1933)The Theory of Monopolistic Competition. Harvard University Press. Dahl, C., and Sterner, T.(1991): “Analysing gasoline demand elasticities: a survey,” Energy Economics, 13(3), 203 – 210.