1. CALIFORNIA STATE UNIVERSITY, MONTEREY BAY MARKETING – BUS-626
EXCEL PRICING TOOL
CALIFORNIA STATE UNIVERSITY, MONTEREY BAY
MARKETING – BUS-626

2. MARKET STRUCTURE FEATURES
PURE MONOPOLISTIC
CHARACTERISTICS COMPETITION COMPETITION OLIGOPOLY MONOPOLY
NUMBER OF MANY FEW TO MANY FEW NO DIRECT
COMPETITORS COMPETITORS
EASE OF ENTRY EASY SOMEWHAT DIFFICULT GOVERNMENT
INTO INDUSTRY DIFFICULT REGULATED
SIMILARITY OF SIMILAR DIFFERENT SIMILAR OR NO DIRECTLY
COMPETITORS’ DIFFERENT COMPETING
PRODUCTS PRODUCTS
INDIVIDUAL FIRM’S NONE SOME SOME CONSIDERABLE
CONTROL OVER
PRICE
INDIVIDUAL FIRM ‘S TOTALLY ELASTIC OR KINKED; BOTH ELASTIC OR
DEMAND CURVE ELASTIC INELASTIC ELASTIC AND INELASTIC
INELASTIC

3. PRICE AND NONPRICE DEMAND
PRICE COMPETITION P1 P2
PRICE
NONPRICE COMPETITION
Q Q2
QUANTITY P1 P2
DIFFERENTIATED PRODUCT
PRICE
UNDIFFERENTIATED PRODUCT
Q Q2
QUANTITY
SOURCE: EVANS AND BERMAN, 1992

4. PRICE ELASTICITY P2 P1 PRICE Q2 Q1 QUANTITY
(Q1 - Q2) / [(Q1 + Q2) / 2]
E =
(P1 - P2) / [(P1 + P2) / 2]
E = NEGATIVE DUE TO (P1 - P2) < 0;
THEREFORE USE ABSOLUTE VALUE

5. ELASTICITY EXAMPLE 30 24 21 15 ELASTIC UNITARY PRICE INELASTIC
ELASTIC
UNITARY
PRICE
INELASTIC
QUANTITY
ONE DOWNWARD SLOPING, LINEAR DEMAND CURVE MAY HAVE
ELASTIC, INELASTIC AND UNITARY ELASTICITY POINTS / ARCS.
ELASTIC: UNITARY: INELASTIC:
(7 - 5) / (7 + 5) (8 - 7) / (8 + 7) (10 - 8) / (10 + 8)
E = E = E =
( ) / ( ) ( ) / ( ) ( ) / ( )
E = E = E =
|E| > |E| = |E| < 1