Is uniform pricing (i.e. one product, one price) always the best for producers and customers?
This first week has already provided hints to answer this question, at least on the producers’ side: by charging customers different prices, producers can greatly increase their profits. To do so, they need a good knowledge of demand: knowing the demand curve for their product, which summarises customers’ behaviour, is a good start.
In sectors where we encounter revenue management, there are usually a few producers who are able to set their own prices. This enables them to charge different prices to their customers.
Other characteristics of the supply side of industries that use revenue management are the production of a perishable good (or the provision of a perishable service), with capacity limits.
Selling the same good or service at different prices to different people is called price discrimination and, while it may not always be an easy task, it is very widespread in the economy.
Do you want more?
In the See also section below, check the link to the Marginal Revolution University in order to access dozens of quality video briefs on the essentials of microeconomics.
And in the Downloads section, you will be able to download a list of reference documents applicable to this course (bibliography), as well as a glossary of useful terms.
Note that further reading is optional, and not compulsory for completing the course.
Coming next week
You will start next week by stepping right into the shoes of a price manager, by experimenting with our online pricing simulation game. This should be fun!
Next, you will more generally explore how producers achieve price discrimination, and what effects it has on customers.
© By ENAC - Nathalie Lenoir CC BY-NC-SA 3.0