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BA 511 Pricing

BA 511 Pricing. Pricing: Supply-Demand Gasoline Application. Market Level Price Influences. General Economic Influences Demand: Price, Income, Price/availability of substitutes and complements, Market size (pop), Quality attributes, …

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BA 511 Pricing

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  1. BA 511 Pricing

  2. Pricing:Supply-DemandGasoline Application

  3. Market Level Price Influences • General Economic Influences • Demand: Price, Income, Price/availability of substitutes and complements, Market size (pop), Quality attributes, … • Supply: Price, Price of Inputs (materials, …), Technology, Competitive/Strategic Influences…

  4. Long Run Trends in Gasoline Prices:Nominal (blue) & 2014 $ (pink) Supply: OPEC Supply: Oil exploration+Tech Demand: China-India

  5. Demand: China & India

  6. Short-Run, Spatial Distribution of Gasoline Prices Gas Buddy Map

  7. Short-Run Supply Factors: Gas Prices (cents)40 Cities (BG, KY, Southeast, Other) 6 Weeks 2011-12

  8. Interpretation • Crude oil $10 increase 3.7 cent gas • State Tax $10 cent increase 7 cent gas • Production 100 miles increase 2 cent gas • Kentucky 4 cent increase • BG not sig different from zero • Omitted Variables: Distribution network complexities; strategic pricing; …

  9. Beyond the Fundamentals

  10. Strategic Pricing:High Demand, Low Price? Nakamura Studies: Only 16% price changes fundamentals driven (higher with raw materials key)

  11. Price Discrimination

  12. Special Topics In Pricing • Consumer Preferences & Transactions Costs • Golden Gate Bridge; Disney; SW Bell (price as product attribute) • NYSE; Supermarkets (smoothing v. inventory) • Fixed Costs • Pharmaceutical Drugs v. Supermarkets • Cable Bundling (+ price discrimination) • Uncertainty • Long Run: MLB, Apple • Short Run: Selling Bagels

  13. Price Smoothing & Inventory • NYSE Specialist • Supermarkets

  14. Personal Experiences with Good/Bad Management

  15. The Good

  16. The Bad

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