Price behaviour models

Date of publication: September 1, 1974


In the past three years price behaviour has been more closely scrutinized than before. The efforts to improve the insight in the relationship between price and buying behaviour were stimulated by the increased competition in the field of retailing. They have resulted in a new approach in formulating theories on price behaviour. In the course of the studies in this field a new model has been designed; this model which is based on panel observations, shows per product category the interdependency of prices by means of a minimum price line. This price line is a line from which the quantity bought over a certain price can be read for all possible prices. This model is an illustration of the actual market situation in which a product field comprising varieties and brands shows differentiation in prices. The needs for more models based on buyers' behaviour has been argued before since the classic price theory proves to be of little value when looking for guidelines for pricing in a developing economy. Whereas marketing is consumer oriented, pricing is mostly guided by other factors than the consumers' preferences. The two main deciding factors are costing and competition.

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