Predicting Price-Setting Strategies
Importance of predicting the pricing strategies
Following the strategy of health care industries, it’s important to predict the price strategy of various individual rival firms within the industry which is characterized by mutual interdependence which is high especially in the healthcare industries which are comparable to an oligopoly market structure. On the other hand, oligopoly is a market whereby the firms are small and any farms performance or moves are expected to affect the other farms performance in the same industry (McGuigan, 2013).
However, the firm needs to be aware of other firms in the industry which possess competition hence changing their pricing strategies and hence need to focus on the competition which entails the firms to act differently for them to move forward. In this case, the firm will have a brighter and successful future. On the other hand, prediction of the actions of which other firms in the industry formulates their hypothesis basing their arguments with different theories. For instant some of the theories include kinked curve demand theory, which states that there is always a sudden change in patterns which causes kinks in the demand curve, again price leadership theory states that a firm that dominates the market sets a price of certain goods and services and are followed by other small firms in the same market or industry.
Price setting strategies of airlines that use game theory
Game theory is a theory incorporates inter-dependent decisions made by the market participant through an opportunity for collaboration or conflict of interest situations. For example, airline industries make the most profit as compared to others in the industry such as Express jet, U.S Airways and others. However, the more a flight is booked, the more it makes on a daily basis. In this case, game theory takes into account that in the airline, there better charges if a passenger books a flight at the last minute compared to those who book early. If the industry is not at full capacity, the prices will fluctuate to make up losses arising due to the lack of passengers (Roger, 2013).
In this case, the game theory and the price setting strategies are the same during all the flying season and all the peak holidays. It’s during this period that airline ticket prices are higher since the demand will be more consistent. For example, if customers fly during the peak season, the prices are more reasonable set at a price which brings revenue for the airline.
McGuigan, J., Moyer, R. C., & Harris, F. (2013). Managerial Economics. : Cengage Learning.
Roger LeRoy Miller. (2013). Economics Today. Pearson