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Pricing goods for retailers: A new approach
Author(s) -
Badra Yassine,
Gaumont Damien
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3197
Subject(s) - economics , price elasticity of demand , microeconomics , social planner , markup language , elasticity (physics) , price elasticity of supply , multiplier (economics) , price discrimination , computer science , macroeconomics , materials science , xml , composite material , operating system
In the retail sector, pricing goods is usually based on practitioner's experiences. Most of the time, the selling price is obtained by multiplying the buying price by an exogenous multiplier. However, There is no particular scientific procedure to determine such a multiplier except from the Lerner index, which is applicable only if the price elasticity of demand is inferior to −1. This paper generalizes the Lerner index to both elastic and inelastic goods by proposing an original model to determine the optimal markup for both static and intertemporal markets no matter what the price elasticity is. Finally, the paper considers the case of the social planner.