If you’ve ever used a ride hailing app, chances are that at some point you’ve experienced a higher than expected fee. Surge pricing is surely unpleasant when you’re on the paying end; almost everyone would prefer to pay less than more for a given product or service. Yet, as a form of dynamic pricing, such…

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In pricing, what is the goal?  Is it to increase profits, revenue, or some other newfound metric?  It seems profit optimization is the obvious answer. After all, they teach that in freshman economics.  Yet, experience repeatedly demonstrates that improving profits is not necessarily the goal.  Why is that? Let’s look at corporate financial valuations and…

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Elon Musk Delivers Pleasant Surprise Tesla Inc. had record deliveries in Q3 2019 resulting in overall profits. Anticipated 2019 production is currently at 360,000 – 400,000 units.  Profits had previously been suppressed at Tesla due to low production volumes (incapable of hitting targets) and the lowering of prices. Elon’s price targets for Tesla only work…

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I know Elon Musk is a Silicon Valley type person, but is he being rational with distribution and price? Tesla announced in late February a plan to end all physical dealerships and move to an online-only distribution. Their justification: to reduce vehicle price to the mythical $35,000. Is this smart?

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The New Invisible Hand: Five Revolutions in the Digital Economy

Middlemen make for an easy target for disgruntled customers and observers of the economy. At times it can be unclear how they are adding value to a transaction. Sometimes it looks like middlemen are simply inserting themselves into a transaction to increase costs and take a cut.

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dollar shave club

Pricing is not only numbers, but strongly psychological and emotional. Certain norms emerge that dictate how products and services are sold in different industries. Customers come to expect those norms, whether or not they are necessarily the most economically efficient.

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Our own research—that of Homburg, Jensen, and Hahn—as well as research by Hinterhuber and still other works by Liozu, repeatedly indicated firms that engage sales, marketing finance, and pricing leaders in pricing decisions outperform those that don’t. At this point, we may even call this settled managerial science.

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