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Intro to Marketing Mr. Bernstein Pricing Strategy: Yield Management November 24, 2014.

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1 Intro to Marketing Mr. Bernstein Pricing Strategy: Yield Management November 24, 2014

2 Price Discrimination Charging different customers different prices Example: Airline tickets Not necessarily based on volume Based on differing buyer “elasticities”, or sensitivity to price changes 2 Intro to Marketing Mr. Bernstein

3 Example: The “Slam Grand” breakfast Assume only 2 market segments – students and senior citizens Diner’s MC = $2 100 sr. citizens will pay $4 100 students will pay $8 Students have lower price elasticity – Why? 3 Intro to Marketing Mr. Bernstein

4 Perfect Price Discrimination Each customer is charged exactly their maximum willingness to pay Profits are maximized when firms can identify buyer’s elasticity “Yield Management” is the practice of price discrimination 4 Intro to Marketing Mr. Bernstein

5 Yield Management: The practice of price discrimination 5 Intro to Marketing Mr. Bernstein

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