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Microsoft® Office Excel® 2007: Data Analysis and Business Modeling, Second Edition by Wayne L. Winston

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Chapter 73. Nonlinear Pricing

  • What is linear pricing?

  • What is nonlinear pricing?

  • What is bundling, and how can it increase profitability?

  • How can I find a profit-maximizing nonlinear pricing plan?

What is linear pricing?

  • In Chapter 71, and Chapter 72, I showed how to determine a profit-maximizing price for a product. We made the implicit assumption, however, that no matter how many units a customer purchases, the customer is charged the same amount per unit. This model is known as linear pricing because the cost of buying x units is a straight line function of x (cost of x units=(unit price)*x). We will see in this chapter that nonlinear pricing can often greatly increase a company’s profit.

What is nonlinear pricing?

  • A nonlinear pricing scheme simply ...

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