Question

Sony charges a price premium for its Play Station 3 over competing brands Nintendo (whose game system Wii is the market leader) and Microsoft’s Xbox 360. What does this tell you about the value of a brand name? Do you think there are ethical issues involved in this type of pricing? If so, what are they?                                  

Answer 1

The brand helps the firm charge an incremental price with respect to its competitors. Brand is the recognition of the fact that a good quality has been delivered to the full satisfaction of the customer time and again. There is a trustworthiness resonating from the brand. This makes the product valuable. This intangible value is the value of a brand name.

No, there are no ethical issues involved in this type of pricing. There is no opportunistic, predatory pricing here. There is no favoritism, there is no price rigging here. This is a price being charged for trust that a brand has built over a period of time by ensuring good quality and consistency. So there is no ethical issue here.