CHAPTER 4

One Perfect Price: Profit Maximization for the Single Price Firm

Ultimately, the purpose of this textbook is to develop innovative pricing strategies designed to capture consumer surplus. But prior to devising such strategies, we must first derive the profit-maximizing strategy for the single-price firm so we have a basis for comparison.

Let’s assume Wendy has created her own interior design business. To start her business, she purchased interior design software for $1000 that would allow prospective clients to visualize her ideas. She also bought an assortment of wallpaper, carpet, and paint samples for $500. Of course, each individual job will incur additional costs. Although the cost and price of each job would vary in real life, ...

Get Innovative Pricing Strategies to Increase Profits, Second Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.