The author reviews the field of pricing strategy and constructs a unifying taxonomy of the many strategies described in the literature. The taxonomy is based on the simple proposition that all the strategies have a common denominator—shared economies among buyer segments, across firms, or among products. The author presents the strategies in comparable terms, emphasizing the principles underlying each and demonstrating the relationship among strategies, the circumstances in which each can be used, and the legal and policy implications of each.
Get full access to this article
View all access options for this article.
References
1.
AbellDerek F., and HammondJohn S. (1979), Strategic Market Planning: Problems and Analytical Approaches., Englewood Cliffs, NJ: Prentice-Hall, Inc.
2.
AdamsW. J., and YellenJ. L. (1976), “Commodity Bundling and the Burden of Monopoly,”Quarterly Journal of Economics, 90 (August), 475–98.
3.
AlchianA. (1959), “Costs and Outputs,” in The Allocation of Economic Resources, AbramovitzM., eds. Stanford, CA: Stanford University Press, 23–40.
4.
AreedaPhillip (1974), Antitrust Analysis., Boston: Little, Brown & Company.
5.
ArrowK. J. (1962), “The Economic Implications of Learning by Doing,”Review of Economic Studies, 29 (June), 155–73.
6.
BainJoe S. (1956), Barriers to New Competition., Cambridge, MA: Harvard University Press.
7.
Boston Consulting Group (1972), Perspectives on Experience., Boston, MA: Boston Consulting Group, Inc.
8.
BursteinM. L. (1960), “The Economics of Tie-In Sales,”Review of Economics and Statistics, 27 (February), 68–73.
9.
CassadyRalphJr. (1946a), “Some Economic Aspects of Price Discrimination Under Non-perfect Market Conditions, Journal of Marketing, 11 (July), 7–20.
10.
CassadyRalphJr. (1946b), “Techniques and Purposes of Price Discrimination,”Journal of Marketing, 11 (October), 135–58.
11.
CooperR., and RossT. W. (1984), “Prices, Product Qualities and Asymmetric Information: The Competitive Case,”Review of Economic Studies, 51, 197–207.
12.
DeanJoel (1950a), “Pricing Policies for New Products,”Harvard Business Review, 28 (November-December), 45–53.
13.
DeanJoel (1950b), “Problems of Product-Line Pricing,”Journal of Marketing, 14 (4), 518–28.
14.
DeanJoel (1951), Managerial Economics., Englewood Cliffs, NJ: Prentice-Hall, Inc.
15.
DolanRobert, and JeulandAbel (1981), “Experience Curves and Dynamic Demand Models: Implications for Optimal Pricing Strategies,”Journal of Marketing, 45 (Winter), 52–62.
16.
HarrisMilton, and RavivArthur (1981), “A Theory of Monopoly Pricing Schemes with Demand Uncertainty,”American Economic Review, 71 (June), 347–65.
17.
HirschW. (1952), “Manufacturing Progress Functions,”Review of Economics and Statistics, 34 (May), 143–55.
18.
HirshleiferJack (1958), “Peak Loads and Efficient Pricing: Comment,”Quarterly Journal of Economics, 72 (August), 451–62.
19.
HouthakkerHendrik (1951), “Electricity Tariffs in Theory and Practice,”Economic Journal, 61 (March), 1–25.
20.
HuntShelby D. (1983), Marketing Theory, The Philosophy of Marketing Science., Homewood, IL: Richard D. Irwin, Inc.
21.
KahnemanDaniel, and TverskyAmos (1979), “Prospect Theory: An Analysis of Decision Under Risk,”Econometrica, 47 (March), 263–91.
22.
KalishShlomo (1983), “Monopolist Pricing with Dynamic Demand and Production Cost,”Marketing Science, 2 (Spring), 135–60.
23.
KatzMichael L. (1984), “Firm-Specific Differentiation and Competition Among Multiproduct Firms,”Journal of Business, 57, 1, 2, S149–S166.
24.
KotierP. (1984), Marketing Management., Englewood Cliffs, NJ: Prentice-Hall, Inc.
25.
MachlupFritz, and TaberMartha (1960), “Bilateral Monopoly, Successive Monopoly, and Vertical Integration,”Economica, 27 (May), 101–19.
26.
MansfieldEdwin (1983), Principles of Microeconomics, 4th ed. New York: W. W. Norton & Company.
27.
McAlisterLeigh (1983), “A Theory of Consumer Promotions: The Model,” Sloan School Working Paper #1457–83, Massachusetts Institute of Technology.
28.
MonroeKent B. (1979), Pricing: Making Profitable Decisions., New York: McGraw-Hill Book Company.
29.
MonroeKent B., and PetroshiusS. M. (1981), “Buyers' Perceptions of Price: An Update of the Evidence,” in Perspectives in Consumer Behavior, KassarjianH. H., and RobertsonT. S., eds. Glenview, IL: Scott, Foresman and Company, 43–5.
30.
NagleThomas (1984), “Economic Foundations for Pricing,”Journal of Business, 57, 1, 2, S3–S26.
31.
NelsonPaul E., and PrestonLee E. (1966), Price Merchandising in Food Retailing: A Case Study., Berkeley, CA: The Special Publications.
32.
NeslinScott A., and ShoemakerRobert W. (1983), “A Model for Evaluating the Profitability of Coupon Promotions,”Marketing Science, 2 (Fall), 361–88.
33.
OlsonJ. C. (1977), “Price as an Informational Cue: Effects on Product Evaluations,” in Consumer and Industrial Buying Behavior, WoodsideA. G., eds. New York: North-Holland Publishing Company, 267–86.
34.
OrenShmuel S. (1984), “Comments on Pricing Research in Marketing: The State of the Art,”Journal of Business, 57, 1, 2, 561–4.
35.
PaldaKristian S. (1969), Economic Analysis for Marketing Decisions., Englewood Cliffs, NJ: Prentice-Hall, Inc.
36.
ParoushJ., and PelesY. C. (1981), “A Combined Monopoly and Optimal Packaging Model,”European Economic Review, 15 (March), 373–83.
37.
PhillipsO. R. (1981), “Product Bundles, Price Discrimination and the Two Product Firm,” working paper, Texas A&M University.
38.
PorterM. E. (1980), Competitive Strategy, Techniques for Analyzing Industries and Competitions., New York: The Free Press.
39.
PrestonLee E. (1970), Markets and Marketing., Glenview, IL: Scott, Foresman and Company.
40.
PrestonLee E., and KeachieE. C. (1964), “Cost Functions and Progress Functions: An Integration,”American Economic Review, 54 (March), 100–7.
41.
RaoVithala R. (1984), “Pricing Research in Marketing: The State of the Art,”Journal of Business, 57, 1, 2, S39–S60.
42.
RobinsonBruce, and LakhaniChet (1975), “Dynamic Price Models for New Product Planning,”Management Science, 21 (June), 1113–22.
43.
SalopSteven, and StiglitzJoseph (1977), “Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion,”Review of Economic Studies, 493–510.
44.
ScammonDebra (1985), “Price Control (Minimum and Maximum),”Journal of Marketing, 49 (Spring), 147.
45.
SchererF. M. (1980), Industrial Market Structure and Economic Performance., Chicago: Rand McNally College Publishing Company.
46.
SchmalenseeRichard (1982), “Commodity Bundling by Single-Product Monopolies,”Journal of Law and Economics, 25 (April), 67–72.
47.
SchmalenseeRichard (1984), “Gaussian Demand and Commodity Bundling,”Journal of Business, 57, 1, 2, S211–S230.
48.
SpenceA. M. (1980), “Multi-Product Quantity-Dependent Prices and Profitability Constraints,”Review of Economic Studies, 47 (October), 821–42.
49.
SteinerPeter O. (1957), “Peak Loads and Efficient Pricing,”Quarterly Journal of Economics, 71 (November), 585–610.
50.
StiglerG. J. (1968), “A Note on Block Booking,” reprinted in The Organization of Industry, StiglerG. J., ed. Homewood, IL: Richard D. Irwin, Inc.
51.
StokeyNancy L. (1981), “Rational Expectations and Durable Goods Pricing,”Bell Journal of Economics, 12 (Spring), 112–28.
52.
TellisGerard J. (1985), “Do Prices Signal Quality: Theory, Measurement and Evidence,” Working Paper #85-53, College of Business Administration, The University of Iowa.
53.
TellisGerard J., and WernerfeltBirger (1985), “The Price of Quality,” Working Paper #85-52, College of Business Administration, The University of Iowa.
54.
TelserL. G. (1979), “A Theory of Monopoly of Complementary Goods,”Journal of Business, 52 (April), 211–30.
55.
ThalerRichard (1980), “Toward a Positive Theory of Consumer Choice,”Journal of Economic Behavior and Organization, 1 (March), 39–60.
