Competitive Price

Sorry for posting being so light of late.  Re-entry after my getaway was more difficult than I’d expected, and I’m still getting back into the swing of life.  And now here we are at May 5th and it’s my first post of the month.

I got to go back to school this past Saturday and it was nice to get back to class.  Even better that it was an economics module with Dr. Gretz, Pricing and Competition.  I’ve mentioned before how much I love economics.  I find it interesting almost invariably, even when I’m struggling to understand it.

I haven’t had this much fun in class in some time.  Maybe it’s because we’d had two weeks off class and it was great to be back with my twelve classmates.  Maybe it’s because of the topic.  Either way, it was a lot of fun, and I left class pretty energized, despite the fact that I have homework for the first time in a few weeks.

So what did we talk about?  Pricing and Competition, of course!

We spent a good part of the first day talking about regulation and competition.  It was nice to gain some understanding of how the SEC/DOJ/FTC approaches their approval of mergers or denial of same.  I still think I’d disagree with 90%+ of their “no” decisions (fires up my libertarian sensitivities for sure) but it was really helpful to understand more of the logic behind some of the decisions.

We spent a good deal of time talking about marginal costs and marginal revenue as well, because that works into pricing.  I found the whole discussion fascinating, even though there’s very little that applies to Samaritan Ministries in the pricing area because our members have complete control over the pricing model.  Should I ever start my own business, though, all of this will be extremely helpful, considering how pricing can work in taking advantage of the demand curve.

For instance, we talked about the all-inclusive pricing model (think getting into an amusement park for a single price and getting access to all the rides without any additional cost) vs. the entry-fee plus add-ons (think razors and blades, printers and toner).  There’s actually quite a bit of additional profit to be made in the first model, and that intrigued me since it was counter-intuitive.

Even the prework was fun for this one, and included a couple of videos from one of our favorite online resources, the Khan Academy.  Here’s one on marginal cost:

Saturday we finished up pricing discrimination, and got into game theory.  My son Toby came to class with me (I got permission from the instructor first, of course) which added to the enjoyment for me…having the opportunity to talk with him about what we learned during the day on the walk home.  Game theory has a lot to do with pricing strategy, and it drove home something we learned in marketing which is that you never want to be competing on price alone.  It’s a bad place to be for any organization or product.

I think I’ll be writing more over the next week or so about what we learned as it continues to sink in and as I work on my paper for class.  It was good to get back to school, and it was nice to have a course that was a little easier for me than the marketing course was.  We’re over the hump now:  only 7 more months of class.  A lot of tough work still ahead but this current course is right in my sweet spot and it was refreshing.

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