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PRICING TACTICS

S6 Economics project. PRICING TACTICS. Carmel Secondary School Ava Choy 6A Patrick Ho 6A Alan Tam 6B. Introduction. Introduction.

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PRICING TACTICS

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  1. S6 Economics project PRICING TACTICS Carmel Secondary School Ava Choy 6A Patrick Ho 6A Alan Tam 6B

  2. Introduction Introduction Apart from lowering the cost to maximize their wealth, it is also very common for the sellers to use various pricing tactics to achieve the same aim. By implementing these tactics such as membership fee, all-or-nothing pricing and Third degree price discrimination, it can help the sellers extract more consumers’ surplus. Let’s have a look of these daily examples…

  3. CASE 1 唉，直頭係讀邊科死邊科啦！ 死啦，D ECO呀，ACC呀，BUS呀…好鬼唔掂喎！

  4. 喂，我聽阿寶話KEVIN LO 的ECO教得 唔錯喎，我諗住依家去報名啦，不如一齊啦~ 唔得啦，如果呢個暑假再唔”谷行”D的話咁A-LEVEL就真係聽死都得啦…

  5. 我諗住報F.6 KEVIN LO的COURSE呀。 英式補習社，呢位同學有乜 o野可以幫 到你？

  6. 哦，咁因為你係新生的關係，所以除了個COURSE要收費外，我地另外仲要收番$30的報名費o架。哦，咁因為你係新生的關係，所以除了個COURSE要收費外，我地另外仲要收番$30的報名費o架。

  7. 哦，咁除了報名費之外都仲有其他行政費用嘛。哦，咁除了報名費之外都仲有其他行政費用嘛。 嘩，使唔使呀，唔係淨係收課程費咋咩？

  8. 咁你填 o左呢張FORM先啦。 算啦，呢D錢都預0左俾佢地賺0架啦，小姐，繼續啦。

  9. Membership fee What is “membership fee”? It is a type of pricing tactics, charging a uniform price together with a “lump-sum payment”( a fixed amount independent of quantity bought).

  10. Membership fee Explanation : • In this case, before paying for the tuition fee, the buyer( Patrick) was also asked to pay a lump-sum fee (registering fee : $30) • In figure 1, given that a uniform price is charged at P0 i.e.$600 tuition fee, the quantity resulted will be in Q0. • The potential consumer surplus then can be captured by means of charging a sum of membership fee as shown as the shaded area

  11. Figure 1 : How can membership fee work ?

  12. 不如等我同我個FRIEND傾o下先啦！ CASE 2 好啦，我依家已經登記o左你的個人資料啦，咁你諗住邊個COURSE呀?

  13. 死啦，有咁多COURSE揀，ALAN呀，有冇乜野好介紹呀？死啦，有咁多COURSE揀，ALAN呀，有冇乜野好介紹呀？ 不如就呢個啦，600蚊有成6堂，兼且仲COVER哂F.6最難的TOPIC添，點睇先？

  14. 但係我淨係有其中2個CHAPTER唔識咋喎，其他的都OK，但係我淨係有其中2個CHAPTER唔識咋喎，其他的都OK， 唔知可唔可以淨係報2堂呢？ 咁我幫你問o下佢得唔得啦！

  15. 小姐呀，我想問 o下可唔可以淨係報其中o個2堂呀？ 唔好意思喎！我地公司規定一係就要6堂報哂，如果唔係就幫你唔到啦！

  16. All-or-nothing What is “all-or-nothing pricing”? A fixed amount of goods is tied up together. Consumers can either buy all of it or give up to buy it.

  17. All-or-nothing pricing Explanation : • The course has 6 lessons • Students need to pay tutorial fee for 6 lessons • Or the students cannot join the tutorial class. • Students cannot pay only for 1 or 2 lessons • Students are compulsory to join the whole 6 lessons… • Therefore, It refers to All-or-nothing pricing.

  18. All-or-nothing pricing When there is a normal pricing … • It is compulsory for the students to take 6 lessons • Consumers are only willing to pay at P0. • Quantity transacted will be at “Q0” • Total revenue : on the shaded area( P0*Q0) • They CANNOT extract consumer surplus( the triangular part above “P0”)

  19. All-or-nothing pricing When “all-or nothing”pricing impose : • It is compulsory for the students to join 6 lessons • The sellers can set a package which extract ALL consumer surplus • Quantity transacted will be at Q0, but the total revenue will increase . • In this case, tutorial center charged student $600 per course • Therefore, they can extract ALL consumer surplus

  20. CASE 3 PATRICK呀，你過來睇o下，估唔到去屯門補平咁多喎，6堂都只係200蚊咋，勁抵呀！

  21. 小姐，我想問o下去屯門讀同去旺角讀 o個D野係咪一樣o架？ 係呀！

  22. PATRICK，你頭先又話600蚊好貴o既，依家去屯門補平咁多喎，點睇先？

  23. 你傻o左咩？屯門咁遠，慳得o個400蚊o黎D時間同車錢都蝕哂啦！你傻o左咩？屯門咁遠，慳得o個400蚊o黎D時間同車錢都蝕哂啦！

  24. 咁你都係幫我報番旺角星期五下午o個個course啦唔該！咁你都係幫我報番旺角星期五下午o個個course啦唔該！ 同學，你最後決定o左報邊個COURSE未呀？

  25. 3rd degree price discrimination What is “3rd degree price discrimination ”? It refers to the sellers to charging different prices simultaneously in two or more different markets (or group of buyers) with independent demands.

  26. 3rd degree price discrimination Explanation: • In this case, although the courses provide in Tuen Mun or Mongkok are the same, the courses cost $200 and $600 in Tuen Mun and Mongkok respectively. • It is because the elasticity of demand in Tuen Mun and Mongkok is different. • The demand in Tuen Mun course is more likely to be elastic than in Mongkok since the consumers in Tuen Mun is less than the one in Mongkok due to the reasons like poor accessibility and time cost.

  27. Wealth maximizing condition : MC=MRt=MRa=MRb • Assumed that there are 2 different markets ( Tuen Mun & Mongkok ) • Producer will equate MRt(marginal revenue of the whole market)with MC • The demand of Tuen Mun market is likely to be more elastic • However, the demand of Mongkok market is likely to be less elastic • Therefore, the seller charged a lower price in Tuen Mun, but higher price in Mongkok • Sellers can extract whole consumer surplus on 2 different markets

  28. Conclusion Conclusion In fact, all these daily examples show the popularity of the use of pricing tactics. And the main use of pricing tactics is to extract more consumer surplus. But apart from that, can you think of any other examples that also show the existence of this practice?

  29. Can you identify any pricing tactics that we have mentioned before? Quizzes 1) In a comics bookstore, students’ entrance fee are often charged lower than those adults. 2) The cinema often offers cheaper tickets especially to students and elderly while the others need to pay the original price. Ans :3rd degree price discrimination & Membership fee Ans :3rd degree price discrimination

  30. SPECIAL THANKS 阿寶 AS OUR PHOTOGRAPHER THE END

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