ABSTRACT
In the real world it is often difficult to relate prices to the simple demand and supply analysis. For example, we find leisure centres and fitness centres offering similar services at vastly different prices. It has been said that an airline jet carrying 350 passengers will charge 100 different prices. A simple T-shirt can cost as little as $3. Print the word ‘Billabong’ or ‘Versace’ on it and its price can rise to more than $50. This chapter investigates how prices are determined in the real world. It distinguishes between public sector and private sector pricing strategies. It analyses different market structures such as perfect competition, monopolistic competition, oligopoly and monopoly. This chapter enables the reader to:
understand how and why firms come to be price takers, price makers or price shapers
analyse the pricing strategies that result from different market situations including yield management and price discrimination.
