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Promoting demand-based pricing

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  • Ronald B. Larson

    (Mid-America Consultants International)

Abstract

Applied economists have been trying to sell businesses on the value of demand-based pricing for many years. Their arguments promoting demand-based pricing have not been particularly persuasive and cost-based pricing continues to be a dominant price-setting method. This paper suggests four changes that may lead more firms to use demand principles when they set prices. Applied economists should acknowledge the benefits of other price-setting processes, shift their focus from profit-optimization to profit-improvement opportunities (e.g., increasing price so it is closer to the demand function), develop pricing heuristics that better meet firm needs, and add new pricing topics to classroom discussions.

Suggested Citation

  • Ronald B. Larson, 2019. "Promoting demand-based pricing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(1), pages 42-51, February.
    • Handle: RePEc:pal:jorapm:v:18:y:2019:i:1:d:10.1057_s41272-017-0126-9
    DOI: 10.1057/s41272-017-0126-9
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    Cited by:

    1. Ebbing, Tobias & Lüthje, Christian, 2021. "Pricing decisions of consumer innovators," Research Policy, Elsevier, vol. 50(8).
    2. Torsten J. Gerpott & Jan Berends, 2022. "Competitive pricing on online markets: a literature review," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(6), pages 596-622, December.

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    More about this item

    Keywords

    Profit improvement; Demand estimation; Cost-based pricing; Pricing curriculum;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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