Pricing and Competitive Strategies

Shan-Yu Chou
Spring, 2020

Name Role Tel e-mail 研究室

Shan-Yu 管院二館
Teacher 02-3366-1054 chousy@ntu.edu.tw
Chou 1113 室
張博瑋 TA r07741072@ntu.edu.tw
梁芳瑀 TA b05701120@ntu.edu.tw

OBJECTIVES

The purpose of this course is to familiarize students with a 3C (Cost, Customer, and
Competition) framework for pricing strategies and the applications of game theory in
marketing. Students will need to spend some time in problem solving (for homework
assignments), in cases and in marketing readings in order to maximize the benefit
obtained from this course. The course will employ a mix of lectures and selected
Harvard Business cases and readings of marketing papers.
Prerequisites Students are expected to have taken marketing courses and have some
backgrounds (or be interested) in microeconomic theory. Mathematics is kept at a
minimum level in this course; however, students are expected to feel comfortable with
math and elementary probability.

GRADING POLICY1

Midterm 35%
Group Assignments 55%
(Homework, Case Analyses and paper
presentation)
Individual Participation 10%

CLASS CONTRACT

1. Form your discussion group (about 6 students per group).

2. Participate actively, both in the class and in the group.
3. Group Case Write-Up, homework and One-paper presentation.
4. Hand in hard copies of required homework before 5 pm of Wed. by dropping
it in my mailbox (Management Building #2); For those groups which could
not, they MUST upload their e-files with clear image (not photos of hand-
written work) before 5pm of Wed. and still hand in the hard copies before the
class begins on Thursday.

1 There will be within-group peer evaluation for all group assignments (homework and paper
presentaton); we may adjust individual members’ scores on group assignments based on the evaluation
results.
1
5. For case write-ups, the length of each report cannot exceed 5 pages and the
report together with its ppts should be uploaded before 5pm of Tuesday (two
days before the case discussion day). Hand in the hard copies of both the written
report and ppts before the class begins on Thursday.
6. Complete the case assignments and readings before coming to the class.

THE TENTATIVE CLASS TOPICS OVERVIEW AND SCHEDULE (SUBJECT TO CHANGE)

Date Subject Harvard Case Papers Chapter/Homework

(week)
Module 1: A framework for Pricing Strategies
Introduction
3/5 (1) Introductory 1
Games
3/14 (6pm):
3/15: Deadline
Introductory Deadline for
3/12 (2) for dropping the
Games adding the
course
course
Introductory
3/19(3)
Games
2
3/26 (4) Value Creation
Homework 1
Value Creation
2
4/2 (5) Segmented
3
Pricing
Segmented 3
4/9 (6) Pricing 9
Cost and Pricing Homework 2
4/16 (7) Cost and Pricing 9
Module 2: Interactions among 4P's
4/23(8) Judo Strategy Case 1 3
Nonlinear
4/30 (9) Homework 3
Pricing
Nonlinear
Pricing
5/7 (10) 4
Communicati
ng the Value
Mid-term
5/14 (11)
Examination
Module 3: Competitive Pricing Strategy
Product Line Villas-Boas
5/21 (12) Case 2
Design (1998)
Pricing in the Gerstner and Hess
Marketing Mix (1991) 5
5/28(13)
Online Lal and Sarvary Homework 4
Marketing (1999)

2
 Varian (1980)
Competitive
Iyer et al. (2003) 11
6/4 (14) Promotion Case 3
Narasimhan
Strategies
(1988)
Module 4: Other Topics
6/11(15) No Class2
ppts of group
Paper
6/18 (16) presentations
Presentation
are due on 6/16.
Module 5: Modern Marketing Issues
Pricing of Blasubramanian et al.
Information (2015)
6/25 (17)3 Goods Xie, Jinhong, and
Advanced Steven M. Shugan
Selling (2001)
Mobile
7/2 (18) Chen et al. (2017)
Marketing

LEARNING MATERIALS

Text

The Strategy and Tactics of Pricing, by John Hogan, Joseph Zale, and Thomas Nagle,
5th edition, 2016.

Cases (Subject to Change)

Case 1. Optical Distortion, Harvard Business School, 9-575-072.

Case 2. Dogfight over Europe: Ryanair (A), Harvard Business School, 9-700-115.
Case 3. New York Times Paywall, Harvard Business School, 9-512-077.

Papers Assigned for Group Presentation1 (2019)

1. Shi, Zijun, Kaifu Zhang, Kannan Srinivasan (2019), “Freemium as an Optimal

Strategy for Market Dominant,” marketing science, 38(1), 150-169.
2. Pavel Kireyev, Vineet Kumar, Elie Ofek (2017) Match Your Own Price? Self-
Matching as a Retailer’s Multichannel Pricing Strategy. Marketing Science
36(6):908-930.
3. Chen, Yuxin, Xinxin Li, and Monic Sun (2017), “Competitive Mobile Geo
Targeting,” Marketing Science, 36 (5), 666–682.
4. Lin, Song (2017),”Add-On Policies under Vertical Differentiation: Why Do
Luxury Hotels Charge for Internet While Economy Hotels Do Not?” Marketing

2 The class will be made up before or after the week.

3 More flexible learning methods will be adopted for the last two weeks.
3
 Science, March, 1-16.
5. Chen Yuxin, Oded Koenigsberg, and Z. John Zhang (2017), ”Pay-as-You-Wish
Pricing”, Marketing Science, 36(5),780-791.
6. Steven M. Shugan, Jihwan Moon, Qiaoni Shi, Nanda S. Kumar (2017) Product
Line Bundling: Why Airlines Bundle High-End While Hotels Bundle Low-End.
Marketing Science 36, 1, 124-139.
7. Cachon, Gerard P. and Pnina Feldman (2017), “Is Advance Selling Desirable
with Competition?” Marketing Science, 36, 2, 214-231.
8. *Alexandrov, Alexei and Ozlem Bedre-Defolie (2014),”The Equivalence of
Bundling and Advance Sales,” Marketing Science, 33,2, 259-272.
9. *Guo, Liang and J. Zhang (2012), “Consumer Deliberation and Product Line
Design,” Marketing Science, 31, 6, 995-1007.
10. *Blasubramanian, Sridhar, Shantanu Bhattacharya, and Vish V. Krishnan (2015),
“Pricing Information Goods: A Strategic Analysis of the Selling and Pay-per-Use
Mechanisms,” Marketing Science, 34, 2, 218-234.

Other things being equal, we still follow the rule “First sign up, first choose”.
1

For those papers with *(8-10), they might be chosen with my consent.

References (To be Revised)

Adams, W. J., and J. L. Yellen (1976), “Commodity Bundling and the Burden of
Monopoly,” Quarterly Journal of Economics, 90, 3, 475-498.
Blasubramanian, Sridhar, Shantanu Bhattacharya, and Vish V. Krishnan (2015),
“Pricing Information Goods: A Strategic Analysis of the Selling and Pay-per-Use
Mechanisms,” Marketing Science, 34, 2, 218-234.

Chen, Y., X. Li, and M. Sun, 2017, Competitive mobile geo targeting,Marketing

Science, 36(5), 666-682.

McAfee, R. P., J. McMillan, and M. Whinston (1989), “Multiproduct Monopoly,
Commodity Bundling, and Correlation of Values,” Quarter Journal of Economics,
104, 371-383.
Villas-Boas, J. Miguel. "Product line design for a distribution channel." Marketing
Science 17.2 (1998): 156-169.
Gerstner, Eitan, and James D. Hess. "A theory of channel price promotions." The
American Economic Review (1991): 872-886.

4
Guo, Liang (2009),”The Benefits of Downstream Information Acquisition,”
Marketing Science, 28 (3), 457-471.
Lal, Rajiv, and Miklos Sarvary. "When and how is the Internet likely to decrease
price competition?." Marketing Science 18.4 (1999): 485-503.
Iyer, Ganesh, David Soberman, and J. Miguel Villas-Boas. "The targeting of
advertising." Marketing Science 24.3 (2005): 461-476.
Varian, Hal R. "A model of sales." The American Economic Review 70.4 (1980):
651-659.
Iyer, G. and A. Pazgal (2003), “Internet Shopping Agents: Virtual Co-Location and
Competition,” Management Science, 22(1): 85-106.

Narasimhan, Chakravarthi. "Competitive promotional strategies." Journal of

Business (1988): 427-449.
Xie, Jinhong, and Steven M. Shugan. "Electronic tickets, smart cards, and online
prepayments: When and how to advance sell." Marketing Science 20.3 (2001): 219-
243.
Shin, Jiwoong, and K. Sudhir. "A customer management dilemma: When is it
profitable to reward one's own customers?." Marketing Science 29.4 (2010): 671-689.
Fudenberg, Drew, and Jean Tirole. "Customer poaching and brand switching."
RAND Journal of Economics (2000): 634-657.
Fay, Scott. "Selling an opaque product through an intermediary: The case of
disguising one's product." Journal of Retailing 84.1 (2008): 59-75.