1. The Nagle, et.al. textbook states: “In order to prove illegal price discrimination under the Robinson-Patman Act and assuming that the supplier sells in interstate commerce, each of five elements must be present.”

· What are these five elements?

· Does it make a difference whether the supplier is engaged in a monopoly, oligopoly or monopolistically competitive environment?

· Describe the rationale for your answer.

2. How can In-depth Interviews assist a manufacturer of a product in the development and implementation of a pricing strategy and the measurement of buyer/customer price sensitivity (i.e., elasticity)?

· Does this type of interview represent a focus group approach to preferences and intentions or actual purchases? Explain your answer.

3. Theoretically, the “optimal pricing decision is a blending of cost and demand considerations.” Yet the textbook states: “An effective pricing decision should involve an optimal blending of, not a compromise between, internal financial constraints and external market conditions.”

· What are the roles of non-incremental fixed and sunk costs, as internal financial constraints, and competitive advantage, as external market conditions, in achieving the best pricing strategy (i.e., pricing decision)? Explain your answer.

 

4. There is a complex flow of thinking required to make thoughtful decisions about reaching price competition. Such decisions begin with the assumption that one or more competitors have reduced their prices or have introduced new products that offer at least some of the supplier’s buyers more value for their money.”

· How would your response differ if this was an oligopolistic supplier as opposed to a monopolistically competitive supplier?

· What difference would it make if the products had or did not have substitutes? Explain your answer.

5. What is the role of Percent Contribution Margin (%CM) in adopting a particular pricing strategy?

· What are the benefits associated with the determination of the actual unit cost of a product or service?

· What are the costs inherent in the %CM formula? Explain your answer.

A beef producer is considering two different types of feed. Each feed contains some or all of the necessary ingredients for fattening beef. Brand 1 feed costs 20 cents per pound and brand 2 costs 30 cents per pound. The table below contains all the relevant data about nutrition and cost of each brand and the minimum requirements per unit of beef. The producer would like to determine how much of each brand to buy in order to satisfy the nutritional requirements for ingredients A and B at a minimum cost. Brand 1 Brand 2 Minimum Requirement Ingredient A 4 units /lb 3 units/lb 40 units Ingredient B 5 units/lb 2 units/lb 46 units Cost 30 cents 35 cent