From complexities to the rules of thumb: towards optimisation in pricing decisions
AbstractThis study is arguing that management would benefit in pricing decision from simple rules of thumb more than from complicated models. These rules are easy to use and they provide management with useful support to move towards optimisation and to diminish gap between theory and practice. This paper presents three kinds of rules for pricing decision dealing with multi-product pricing, dynamic pricing and pricing objective function. The rules are adjusted versions of the Amoroso-Robinson rule. The paper also presents survey evidence on pricing decisions in Finnish firms. This evidence is based on a questionnaire responded by 205 firms. Finnish firms tend to use cost-plus pricing and are largely full-cost adopters although many of them report maximising objectives for pricing. Evidence shows that the firms are able and motivated to apply analytical methods for pricing. However, only 22% of the firms have adopted optimisation models in pricing decisions.
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Bibliographic InfoArticle provided by Inderscience Enterprises Ltd in its journal International Journal of Applied Management Science.
Volume (Year): 1 (2009)
Issue (Month): 4 (January)
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Web page: http://inderscience.metapress.com/link.asp?target=journal&id=121170
pricing decisions; optimisation; several products; dynamic pricing; objective function; pricing survey; Finnish firms; decision making; Finland; rules of thumb; multi-product pricing;
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