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I. Economic and Behavioral Foundations of Pricing

Takeaways. I. Economic and Behavioral Foundations of Pricing. II. Innovative Pricing Concepts and Tools. III. Internet Pricing Models. Outline. Top 3 takeaways + your best class session (on an index card) Top 10 Takeaways Teaching Evaluation Sample Exam Questions.

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I. Economic and Behavioral Foundations of Pricing

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  1. Takeaways I. Economic and Behavioral Foundations of Pricing II. Innovative Pricing Concepts and Tools III. Internet Pricing Models

  2. Outline • Top 3 takeaways + your best class session (on an index card) • Top 10 Takeaways • Teaching Evaluation • Sample Exam Questions

  3. The Ten Takeaways • EVC (Is the price too high?, Cumberland Industries). • The Ho’s Diagram (breakeven analysis and curve, evaluate price change and separate winners from losers). • Four Strategic Principles (1. know your opponents, 2. distinguish between one-shot vs. repeated interaction, 3. develop strategic foresight, and 4. promote coordination) (Federated Industries). • Reference Price, Price Image, and Prospect Theory ( Biopure, May Company, Tweeter, Computron) • Conjoint Analysis (demand curve and price sensitivity, EVC for brand and features).

  4. The Ten Takeaways • Customize, Customize, Customize (by customer, location, product design (versioning), quantity (nonlinear), and time) (Cambridge Software) • Customer vs. Product Margin (bundling, product line pricing, Tweeter etc., lost leader). • Experimental Market Testing (price matching, B2B contract Design, seller versus buyer-posted price formats, auction simulation). • Revenue Model Design (revenue levers, incentive compatibility, lock-in, eBay and FreeMarkets). • Revelation and Efficiency Principles (English Auction). Revenue equivalence and strategic equivalence theorems. Revenue rankings of auction formats.

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