Question

Describe life-cycle budgeting and life-cycle costing and when companies should use these techniques -

Describe price discrimination and peak-load pricing

How do antitrust laws affect pricing

Answer 1

Life-cycle budgeting and life-cycle costing

  

Life cycle Budgeting and Life cycle costing
 
     An estimate of all expenses and revenues a company incurs and derives from a product. The life cycle budget includes all expenses from research and development, marketing, customer services and so forth. It also includes revenues from sales, royalties and other sources. It is calculated from the beginning of a product's research to its estimated date of withdrawal from the market. Life cycle budgets help a company determine whether or not a product is going to be profitable.A life-cycle budget is an estimate of the total amount of sales and profits to be garnered from a product over its estimated life span. This estimate includes the costs to develop, market, and service a product. Thus, the time span covered is from the initiation of a product as a design concept through its estimated withdrawal from the market. Life-cycle budgets are useful for estimating the profits and cash flows associated with a project, and can be used in the decision of whether to invest in a product. A crucial element in this analysis is the estimation of the lifespan of a product, since managers tend to be overly optimistic and estimate a longer lifespan than is really the case, resulting in overestimated sales.
              LCC is a method consisting of estimating the total cost of a product, taking into account the whole life cycle of the product as well as the direct and external costs. Actually estimating the cost of a product along with its life cycle or the life cycle environmental resources consumption and releases to the environment can refer to the same conceptual framework. The goals and scope have to be properly defined and data inventory including allocation issues must be considered


Price discrimination
              Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to. In pure price discrimination, the seller charges each customer the maximum price he or she will pay

Peak load pricing
       
        It is a form of inter-temporal price discrimination based on efficiency. For goods and services, demand peaks at particular times — for roads and public transport during commuter rush hours, for electricity during late afternoon and so on.

Antitrust law affect pricing
            
Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors.
    The antitrust law developed by India is The Competition Act, 2002 which was fully constituted on March 1, 2009. The Competition Act monitors any economic activity that monopolizes competition within the market; it aims to protect consumers and small enterprises and ensures the freedom of trade.Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. If in case a product need high rate in the market for its demand creation the law discourage it and it may be affect the firm. More over this antitrust law provide a better marketing condition for the traders in our country. It reduces the disputes between the traders in pricing their products.