Question

What are the major public policy issues in pricing? Does Amazon practice predatory pricing or just good competitive marketing?

Please write atlease 350 words...

Answer 1

Public policy issues includes seller pricing the products at unfair price (either too below or too high) to either increase profits or to remove competitors fro the market. Major public policy issues in pricing are :

1. Price fixing: When all the sellers in the market fix the same price (relatively higher to normal price) to a product, without causing decrease in demand is called price fixing. It is illegal as it is a case of collusion wherein consumers are forced to buy the product at the fixed price.
2. Predatory pricing: Pricing below the cost of the product is called predatory pricing. It helps the suppliers to capture larger market share, increase it's sales and remove the competitors from the market. The losses incurred are covered by profits in other departments or other product's sales. It is a long term strategy wherein initially the motive to beat the competitors so that they can increase the prices later.
3. Price discrimination: Sellers often charge different prices for the same product to a same category of consumers. This is not permitted across countries.
4. Deceptive pricing: The sellers create a deception in the mind of customers that they are getting the products at a low price than the actual price. for an instance clearance sales, price confusion.
5. Retail price maintenance: Also called as resale price maintenance wherein manufacturers or wholesalers instruct the retailers to sell at a particular price (normally above the floor price)

In my opinion, Amazon doesn't practice predatory pricing. Rather it is a good competitive marketing strategy. Amazon takes advantage of psychology of the consumers pricing perception to change the individual prices of a particular product many times a day. It provides offers like best buy price within 30 minutes to induce customers to act on their purchase. Amazon advertises frequently of low prices on the top selling products and increases its margin on the complementary goods or less bought products. Through one of the options “customers also bought”, Amazon promotes all the products simultaneously letting the consumers which one to buy. Some of these products are charged higher and some lower than market rate. In this way, without predatory pricing, Amazon earns a huge profit and market share.

Hope it helps. Thankyou!