Module 5 Discussion Purpose

This assignment is intended to help you learn to:

• Discuss elasticity-based markup formulas to determine profit-maximizing prices in monopolistic competition, monopoly, and Cournot oligopoly.
• Formulate pricing strategies that enhance profits given specific cost and demand structures.
• Explain how price-matching guarantees, loyalty programs, and randomized pricing can enhance profits in markets with intense price competition.
• Explain the economic basis for limit and predatory pricing.
• Identify examples of networks and network externalities, and determine potential network connections.

Instructions

This discussion helps you apply key pricing concepts to real-world competitive environments. You will analyze how elasticity-based pricing, strategic pricing policies, and network externalities influence profit maximization in various market structures.

Choose ONE of the four discussion topics provided below and answer with a comprehensive post, including in-text citations and references. Incorporate at least one current example and two credible references (e.g., journal articles, industry reports, or company analysis).

1.Elasticity and Market Structure:

• How does elasticity of demand affect optimal pricing in monopoly, monopolistic competition, and Cournot oligopoly? Provide an example from a real industry (e.g., pharmaceuticals, streaming, or telecommunications).
• A company estimates its price elasticity of demand as – 1.5 and marginal cost at $40. Using an elasticity-based markup formula, what price would maximize profits? Explain how market power influences this result.

2.Predatory Pricing and Regulation:

• Discuss the economic rationale behind predatory pricing. How can regulators distinguish between competitive pricing and predatory intent? Reference a relevant antitrust case (e.g., Amazon, Walmart, or Uber).
• Summarize the case, findings, and your thoughts regarding those findings based on what you know regarding predatory pricing.

3.Strategic Pricing Practices:

• Do price-matching guarantees promote competition or discourage it? Discuss whether these guarantees act as a subtle form of collusion. Provide examples from retail, airlines, or online markets.
• How can brand loyalty programs or randomized pricing strategies strengthen a firm’s profitability when facing aggressive price competition? Use a specific company example (e.g., Starbucks Rewards, Amazon Prime, airline loyalty programs).

4.Cost, Pricing, Market Entry, and Demand Structures:

• Consider a firm with high fixed costs and relatively inelastic demand. What type of pricing strategy would enhance profits in this scenario? How would that strategy change if demand became more elastic?
• Under what conditions can a firm use limit pricing to deter potential competitors? Provide a real or hypothetical example where this strategy was successful or failed.