Quiz 18: Pricing Concepts


Fair-Trade laws: Fair-trade laws allow a manufacturer to stipulate minimum retail prices for their products and require dealers of signature contracts to abide by these prices. The law asserts that it is the manufacturer's right to determine the product's price. Hence, the manufacturer possesses authority to protect its asset by maintaining the minimum price as per the retailer's requirement. The importance of fair trade laws declined over the years as price competition and discounters emerged to strengthen the component of marketing strategy. Unfair trade laws: Unfair trade laws require sellers to maintain the minimum price for comparative merchandise. According to the Act of 1930, the laws propose the protection of small specialty shops and dairy stores from loss leader strategy of attracting consumers through least prices. However, state laws set the retail price at cost plus markup prices. The unfair trade laws have been in practice since the time when lawsuits were brought against warehouse clubs for practicing loss leader strategy for gasoline prices. Consumers support fair trade practices as they are legalized practices that benefit both consumers and government. Consumers support unfair trade practices as they provide short-term benefits such as price reduction of the products through discounts. "A small store owner will not support unfair trade practices as they exploit their business." • A large-scale wholesaler can provide discounts on bulk purchases; but when a small store owner tries to be a loss leader it will be difficult for him to manage the financial position. • In regard to that situation, the Act of 1930 proposes the protection of small specialty shops and dairy stores from loss leader strategy of attracting consumers through least prices.

Introduction of CARS program: The government introduced a special program called Car Allowance Rebate System (CARS) for encouraging drivers to buy efficient new cars. The government gave a rebate of $3,500-$4,500 on new cars to all qualified drivers. The program was initiated with a vision to get rid of old cars that emitted volumes of hazardous gases and that spoiled the environment. The program became a huge success and resulted in sales of more than 540,000 cars in that year. Price-incentive plan is given below: The government must bear the cost of the price-incentive plan initiated to replace old cars with new efficient cars. It would majorly make use of the taxes paid by the citizens to cover the cost incurred by this plan. The cost must be completely paid by the government since no other individual or company will prefer to bear such a huge cost. The other way to distribute the cost would be to ask the automobile companies to be socially responsible and contribute to the economy by providing rebates on new efficient cars. This would improve the sales and perception of that company. In addition, the company will also gain tax rebates from government. This would be a win-win situation to the environment, drivers, automobile company and the government. Thus, encouraging companies to contribute more to the economy under Corporate Social Responsibility would help the government to minimize the cost and safeguard the environment, guaranteeing the satisfaction of the drivers and that of the company.

Price determination is explained below: The researchers evaluate prices by applying the concept of demand and supply and by implementation of cost-oriented analysis. This economic theory technique helps to correct equilibrium prices in the marketplace by equating supply and demand. Prices at amusement parks: The entrance fee at amusement parks may increase or decrease, depending on entertainment, number of games, attractions, and rides that are offered to public. List of things offered by the amusement park are given below: • Roller coasters • Water rides • Flat rides • Dark rides • Food availability When the amusement park planned to add new rides due to rising price of fuel, it may indirectly increase the entrance prices at amusement parks. The following is the list of things that directly increase the entrance prices at amusement parks : • Introduction of new games • Usage of advanced technology • Introduction of recreation facilities • Enhanced security and support service Amusement parks need not increase the entrance prices with the support of patron, or by going public; they can ask the marketers to invest. They can also approach other companies to operate shows and thus decrease operating expenses.

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