Question

Describe a particular industry in which firms’ pricing decisions are dominated by their consumers’ social motivations (namely, by the desire of consumers to obtain social status and/or belong to “desirable” social groups via the purchase of the firms’ products/services). What types of pricing strategies do firms in that industry adopt in the light of social motivations? Argue why such pricing strategies increase a firm’s profits.

Answer 1

While buying the product people not only consider the price but social status also relevant example automotive industry firms like Benz, Audi, Landrover such other firms produce the car their marker price of the cars is ten times of the more than the normal car. While pricing the firm will consider following factors

• The numbers of the goods produced limited in the case of luxurious cars they produce 2 or three
• The Market price of such goods twenty times of the more than cost price able make supernormal profit
• Since supply is less rich people ready to pay any price in order to have those goods
• Adding the special features makes distinct from the competitors.

These are the strategies adopted by the firm in social motivation customers who wants recognition owning such goods.