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Pricing goods for retailers: A new approach

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  • Yassine Badra
  • Damien Gaumont

Abstract

In the retail sector, pricing goods is usually based on practitioner's experiences. Most of the time, the selling price is obtained by multiplying the buying price by an exogenous multiplier. However, There is no particular scientific procedure to determine such a multiplier except from the Lerner index, which is applicable only if the price elasticity of demand is inferior to −1. This paper generalizes the Lerner index to both elastic and inelastic goods by proposing an original model to determine the optimal markup for both static and intertemporal markets no matter what the price elasticity is. Finally, the paper considers the case of the social planner.

Suggested Citation

  • Yassine Badra & Damien Gaumont, 2020. "Pricing goods for retailers: A new approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1493-1500, December.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:8:p:1493-1500
    DOI: 10.1002/mde.3197
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    References listed on IDEAS

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    1. Grant, Simon & Quiggin, John, 1994. "Nash equilibrium with mark-up-pricing oligopolists," Economics Letters, Elsevier, vol. 45(2), pages 245-251, June.
    2. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
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