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 Pricing  posted by  duggu   on 12/9/2007  Add Courseware to favorites Add To Favorites  
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Tucker, Catherine, 15.818 Pricing, Spring 2005. (Massachusetts Institute of Technology: MIT OpenCourseWare), (Accessed 11 Jul, 2010). License: Creative Commons BY-NC-SA

Gas prices have fluctuated dramatically over the past few years.

How should gas station owners set prices? Should they be charging higher or lower prices than they currently are? (Image courtesy of TedsBlog.)

Course Highlights

This course features case studies and questions for discussion in the lecture notes section, and group assignments.

Course Description

This course, primarily discussion based, provides a framework for understanding pricing strategies and tactics. Topics covered include pricing in competitive markets, estimating demand, price discrimination, the role of price cues, anticipating competitive responses, pricing in business to business markets, and pricing of new products. Lectures and cases are the primary modes of learning.



Nature and Purpose of the Course

The goal of this course is to ensure that students can navigate the complex issues surrounding setting the most profitable long term price for a good or service.

Ultimately, upon completion of this course, students will

  • Master a state-of-the-art framework for analyzing pricing issues
  • Be familiar with essential techniques for making profitable pricing decisions

Evaluation of Work - Approximate Weightings

Class Participation 24%
Three Group Case Reports 36%
Two Individual Exercises 40%

Organization of Course

Each week we have a theory class followed by a case discussion. The case is designed to reinforce that week's lecture, but will also build on the insights of previous lectures.


All students should have had 15.010 / 15.011 or an equivalent course in microeconomics and should be comfortable with analytical material.


An important concern in any discipline is the ethics of its practitioners. This is certainly true in marketing and advertising. Ethical issues will arise in the case discussions. Indeed, some managers in the cases act in ways you might not consider ethical. These actions are left in the case specifically to raise ethical issues. We encourage you to address these issues in class discussion.



This class consists of a set of six lectures, and a set of six case discussions, denoted below.

Week # Topics Key Dates
1 Lecture: Introduction: Pricing Strategies - the Good, the Bad and the Ugly  
2 Lecture: Economic Value to the Customer (Key Lecture)

Case: Exploring EVC: Cumberland Metal Industries
3 Lecture: Measuring Demand and influencing Consumer Behavior: A Practical Approach to Pricing a New Product

Case: Pricing a Product for the First Time: Virgin Mobile U.S.A.
First exercise distributed
4 Lecture: How to Price to Best your Competitors?

Case: How to React to a Price Cut?: Beauregard Textiles

Case: When is Price-Cutting a Good Idea?: Philip Morris
First exercise due
5 Lecture: The Basic Theory of Segmentation

Case: Product Line Pricing: American Airlines Revenue Management
Second exercise distributed
6 Lecture: Customizing Prices in Multiple Ways

Case: Pricing in the Marketing Mix: Keurig
Second exercise due   Tell A Friend