Question on optimal pricing strategy

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Reference no: EM1368121

Optimal pricing strategy varies significantly across different market structures. The pricing guidelines in a monopoly market are relatively straightforward. Since the company is the only producer offering the product, it can mark-up the price as far as the customer can bear. The pricing strategies for a producer operating in a perfect competition structure are also fairly intuitive. They are price takers, and hence price is set at the marginal cost of the product. This is due to the fact that there are many firms offering nearly identical products. However, there is optimal pricing for the market structures offering differentiated products with many competitors (oligopoly) or a few producers (monopolistic competition). These are much more complex and involved. It has been stated that differentiation in products that creates differences in customer valuation is the most prevalent type of competition.

Reference no: EM1368121

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