EconAir

      INTRODUCTION – COMPANIES WITH “MARKET POWER”   The focus of this essay is on corporations that sell products or services to final consumers. A common strategy is price discrimination.   Retailing is somewhat different than most market transactions. Retailers sell to a large number of consumers. They negotiate prices and terms of sales with a wide variety of suppliers, both in size and products offered.   Retailers and distributors are market-makers. They bring buyers (consumers) and sellers (manufacturers) together. Some companies have their own bricks-and-mortar stores (Sherwin-Williams) or their own websites. Many online retail sites such as Amazon are market-makers.   This discussion assumes that sellers and retailers have “market power.” This may be a result of past strategies of branding, advertising, developing loyal or return customers, developing market niches by product line extension, or any other strategy that differentiates its produc...

INTRODUCTION This blog was prompted by an article in the Sunday New York Times   Business Section of April 14 titled, “Sometimes We Want Prices to Fool Us.”   The article is about the J. C. Penny’s merchandising disaster. HAGGLING In 2012, J. C. Penney’s sales dropped 25% compared to 2011.   Over two years ago, Penny’s brought in Ron Johnson from Apple Stores to turn the company around.   Mr. Johnson eliminated sales and coupons and promised shoppers “everyday low prices,” Walmart’s slogan.   This saved huge amount of money on inventory and advertising costs and smoothed out cash flow.   Great strategy.   Penny is near bankruptcy.   Ron Johnson has been fired and sales supplements are reappearing in my newspaper. Simple economic theory assumes one equilibrium price.   Each potential consumer compares his/her expected “pleasure” from buying the product to the cost (price) of the product, and then decides whether or not ...