Optimal pricing strategies for a cluster of goods: Own- and cross-price effects with correlated tastes
gent valuation methods are used to identify observed and unobserved preferences of goods and services. We apply these methods to compute willingness to pay (WTP) for a product conditional on having purchased another offered product. We provide a derivation for own-price and compensated cross-price elasticities whose results suggest a pricing strategy considering all offered goods simultaneously. Therefore, we solve the social plannerâ€™s problem maximizing a weighted function of producerâ€™s revenues and consumerâ€™s utility for the set of optimal prices. We show an application to collegiate sports, but these methods can be extended in a straightforward fashion to other goods.
|Date of creation:||30 Nov 2016|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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