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Selling Demand-Based Pricing

Profile image of Ronald LarsonRonald Larson

2017, 2017 Annual Meeting, July 30-August 1, Chicago, Illinois

https://doi.org/10.22004/AG.ECON.259135
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Abstract

Applied economists have been trying to sell businesses on the value of demand-based pricing for many years. Their arguments favoring demand-based pricing have not been particularly persuasive and cost-based pricing continues to be the dominant price-setting method. This paper suggests four changes that may lead more firms to use demand principles when they set prices. Applied economists should acknowledge the benefits of cost-based pricing, shift their focus from profit-optimization to profit-improvement opportunities, develop principles and methods that better meet firm needs, and add new pricing topics to classroom discussions.

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