Category: Essentials of Economics: 8e Ch 06

Try having a browse around the web for the price of an 8GB iPod Nano. How much variation can you find in price? It is almost certainly the case that you will find very little variation in price. So, why is this? Is it that Apple have such dominance over the market that they can force retailers to charge the price they want? Well no, they can’t. However, they do have some interesting marketing strategies that help them maintain the price at the level they want. The article below looks at these and the implications for retailers and the market price of these strategies.

Gadgets for sale… or not MSN Slate (22/12/06)

Questions

1. Explain what is meant by the term ‘price dispersion’.
2. Explain how Apple manage to keep the price of iPods from falling below a certain level.
3. Discuss the impact on competition of using minimum advertised price and marketing subsidies as tools to maintain the desired market price.