Week 6 — Pricing with market power
When can I charge different customers different prices, and which deals beat a single price?
This week you will
- Say when charging different customers different prices works, and set the best price for each group.
- Design a membership fee or a bundle that beats a single price.
- Name every pricing tactic your own company uses.
1. Watch
Work through the three concept pages in this order. Each page has a short video at the bottom.
| # | Concept page | Textbook |
|---|---|---|
| 1 | Price discrimination | P&B 10.1–10.3 (10.4 skim: the idea and one example) |
| 2 | Two-part pricing and bundling | P&B 10.5, 10.6 |
| 3 | Peak-load pricing | P&B 10.7 |
2. Try
On each concept page, do the “Try it” box. Then try this company version: find your company’s fences.
- Open your company’s price page, its app, and its 10-K (Item 1, and the revenue-recognition note).
- List every pricing tactic you can see:
- a student or military discount — group pricing. Who pays more? What stops resale: an ID check, a named account?
- a multi-pack or a pass — nonlinear pricing.
- a membership or subscription with lower prices inside — two-part pricing.
- a bundle, or a “plan” that includes several services — pure or mixed bundling.
- holiday or rush-hour prices — peak-load pricing.
- Examples: a streaming service might show tiers and a yearly plan. A hotel chain might show a loyalty program, member rates, and holiday prices. A coffee chain might show an app with rewards and a multi-drink card.
- Put one deal through the deal designer on the two-part pricing page. Export the picture and copy its row.
That is Playbook P6 in four steps.
Class experiment
Anonymous and not graded. The whole class answers one short question; the results appear when it closes.
3. Check yourself
Answer the “Check yourself” questions at the end of each concept page. They are not graded. They tell you if you are ready for the homework.
4. Do in Moodle
- Practice Homework U6 — concept questions, plus Excel Lab items with
Lab_U6.xlsx(a regional airline: business and leisure fares, a frequent-flyer club fee, and three table questions). - Playbook Page P6 Pricing Tactics Inventory. Paste your deal-designer row as the last line of your post.
- No peer comments this week.
This week’s formulas
- Each group: P = a − b·Q, MR = a − 2b·Q, set MR = c → P* = (a + c) ÷ 2 · Lerner (P − c) ÷ P = 1 ÷ |ε|
- Two-part tariff: per-unit price = c · Fee = (a − c)² ÷ (2b), twice the best single-price profit
- Bundles: a customer buys if value ≥ price · compare separate, pure bundle, mixed
- Peak-load: if (a − c) ÷ (2b) > K, sell K at P = a − b·K; otherwise P = (a + c) ÷ 2
Due dates and points are in Moodle.