Price Discrimination and Related Concepts
In this paper, we will discuss some basic concepts regarding price discrimination and its related topics. We will first choose a product and outline its market structure, then by using a technique as described in the article written by Michael E. Porter we will discuss how the price of our chosen product should be decided so that profits are maximized. Finally, we will discuss how the pricing technique would affect the profit, supply and demand of each segment of our market. For the reader to have a more general and easy idea regarding these mentioned concepts, we have chosen Pepsi as our main product.
Market structure
Pepsi is a global brand which originated in the United States more than a century ago. It is a carbonated water drink and it also owns many different subsidiaries alongside its main product such as mineral water and other cold drinks. When having a close look at its market structure, we see that it has many important rivals in the business but most notably it faces competition from the firm Coca Cola which is also known as Coke.
Both of these firms have been logged into intense battle for supremacy over each other since many decades and therefore if we assess the market structure of Pepsi then it is seen to have a sort of duopoly since both Pepsi and Coke nearly dominate the market of cold drinks. Pepsi have even been known to use barriers to block the entry of newer firms which may have proved to be great competitors later on in their lifetime. Pepsi can also be classified as being under monopolistic competition where the overall industry is competitive but the other corporations are able to create some sort of influence in the market through product differentiation and brand recognition.
Product pricing
There are many different techniques which Pepsi can use in determining its product's price so that it can generate...
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