ABSTRACT
Once we have estimated the price–response function, and we have information about the cost structure of the product or service of interest, we can start the process of optimizing the price. This chapter will focus on the theory of price optimization and how we can calculate optimal prices in practice using Excel. To do so, we will analyze real-life data from various industries in a step-by-step manner. The chapter will cover the following topics:
Basic price optimization.
Price optimization with capacity constraints.
Optimal price differentiation with capacity constraints.
Optimal time-based price differentiation.
Elasticity and optimization.
Pricing with competition.
