PRICING STRATEGIES
7649-001 Spring 2014 EMBA
Course Syllabus – Updated December 1, 2014
Location:
TBD
Time:
TBD
Professor:
Brett R. Gordon
Contact info:
Email:
Office:
Phone:
Office Hours:
By appointment only via email.
Teaching
Assistants:
Fani Dimitriadi (fdimitriadi14@gsb.columbia.edu)
Taier Gao (tgao14@gsb.colubmai.edu)
brg2114@columbia.edu
511 Uris
212.854.7864
Introduction
This course prepares students to address strategic and tactical pricing issues and to identify profitboosting changes in pricing practices across a range of professional contexts – as management
consultants, product managers, entrepreneurs, business unit managers, and M&A advisors.
Pricing presents managers with one of their most powerful levers for maximizing profits and
shareholder value. However, this value often lies untapped within many organizations. Managers
often lack a clear understanding of how to improve on historical pricing practices within their
companies and industries and how to apply such knowledge to new product settings.
The course will draw on a mixture of analytic marketing techniques, marketing strategy, statistical
analysis, and economic theory to describe approaches that are useful for optimal pricing decisions.
Some examples of questions we will address in the course: How does a firm determine the price for a
new product? How does a firm assess whether the current price is appropriate? What is value pricing?
Which price segmentation strategy is optimal? How can a firm avoid a price war?
The course will use a mix of lectures, case discussions, in-class simulations, and guest speakers.
Mini-cases and problems will also be employed to make students apply their learning to practical
situations. The first six weeks of the course will establish a foundation for effective pricing decisions
by teaching key economic, analytical and behavioral concepts associated with understanding
customer value, willingness-to-pay, and demand estimation. The rest of the course will (a) introduce
students to advanced pricing techniques that aim to create additional value, including segmented
pricing, nonlinear pricing, pricing structures, and promotions and (b) highlight practical applications
of these approaches within a variety of specific industry contexts.
Reading Materials
The course has a mixture of required and optional reading assignments in the form of articles and
cases. I will assume that students have done the required reading for each class, have analyzed
assigned case materials, and are prepared to discuss them. The optional readings in the class-by-class
plan aim to give students additional depth on topics of interest – I might present key points from
these in the class, but students are not required to have reviewed the optional reading.
All required materials are included in the course reading packet. I will post all optional material on
Canvas in advance of class.
The textbook for the course is:
 The Strategy and Tactics of Pricing, by Nagle, Hogan, and Zale, 5th Ed, 2010. (NHZ)
The following books are mentioned solely as supplemental reading:
 Pricing and Revenue Optimization, R. Phillips, Stanford Business Books, 2005.
 Price Theory and Applications, P. Pashigian, McGraw-Hill, 1995.
Software
The course uses Excel and the Data Analysis and Solver add-ins to conduct regression and other
statistical analyses. You are free, however, to conduct analysis using whatever software you prefer.
Policy on Laptops, Cell phones, and Other Devices
I strongly discourage you from using laptop computers or tablets during the class. Even though you
may prefer to use these devices for taking notes, they tend to create more distraction than they are
worth. Please refrain from using cell phones and other small electronic devices during class.
Student Teams
Students are asked to form teams of 3 students to work on the case analyses and final project. You
should form a group as quickly as possible. If you need help in forming a team, let me know in a
timely manner so I can facilitate communication with others. Groups with more than three students
are not permitted (no exceptions).
Grading
Grades will be based on four areas:
1. Class participation:
2. Three individual short assignments (SA):
3. One individual case write-up (IW):
4. One group case write-ups (GW):
5. Course Project (team):
TOTAL
Pricing Strategies
Prof. Brett Gordon
7% each, total =
15% each, total =
15% each, total =
24%
21%
15%
15%
25%
100%
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Each of the grading components is described in detail below.
Class Participation and Attendance
You are invited to highlight insightful linkages between class material and your past experience as a
professional and a consumer, to raise challenging questions and issues related to the pricing topics
being reviewed, and to participate actively in discussion of problems and cases. It will be assumed
that students have read and analyzed the case materials and problems assigned to each class and are
prepared to discuss them.
Students find in-class discussions a valuable part of the course, and effective discussions are only
possible if everyone is prepared. You should come to class prepared to defend your analysis. To
create incentives to do this, I may randomly select (i.e. cold call) students to answer questions. You
should view class participation both as an opportunity to ask questions to enhance your understanding
as well as an opportunity to demonstrate your critical analysis of the material.
Attendance in class is required. We will spend a great deal of time engaged in class discussion, which
means that by missing class you will miss an important part of the learning experience. To help me
with attendance, a sign-in sheet will be passed around at the beginning of each class. Classes start on
time and lateness may count as an absence.
If you anticipate missing a class, please let me know in advance (grave illnesses, family emergencies,
or unavoidable job-related conflicts will be excused). My policy is that if you miss more than 4.5
hours of class time (even pre-notified), your class participation grade may be adversely affected.
Short Assignments
There are three short assignments in the course. All are to be done individually. Most involve
answering questions relating to a case assignment or other readings. These assignments will be made
available later on Canvas.
Case Write-ups
The due dates for the cases and assignments are given in the Class Schedule section of this document.
You will complete one case with your group (GW) and one individually (IW). Both cases are due at
the beginning of the class where that case will be discussed. The following cases will be due:


Keurig at Home (IW)
XM Satellite Radio (GW)
Each full case write-up must not exceed three pages (12-point Times New Roman, single-spaced,
one-inch margins). This limit does not include exhibits such as tables or graphs. If you need more
than three pages, then you are probably including too much information in your solution. Assume the
reader is familiar with the case; do not summarize or restate more of the case than necessary.
The questions for each case will be posted to Canvas. All other cases are covered through the short
assignments or with preparation questions listed in the detailed course schedule.
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Prof. Brett Gordon
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You only need to answer these questions in the case write-up. In addressing the questions, please
restrict your focus to information in the case. There are often multiple ways to answer a question. Do
not be concerned with getting the “right” answer, but whichever answer you choose should be
adequately supported by the facts of the case and any further assumptions you make (which should be
made clear to the reader).
Course Project
Your team will complete a course project. The goal of the project is to apply the concepts from the
course to a real pricing problem, either one created by the team or an opportunity faced by a real
organization (potentially your own). I include a set of suggested project ideas after this section, but
you are free to choose your own topic. If you do, please discuss it with me well in advance.
Timeline and Deliverables
A one-page optional proposal describing the topic, specific goals, and proposed project plan is due on
Friday, February 28, 2014. The goal of the proposal is to help ensure that you choose an appropriate
problem for the project. The outline should specifically address why this is an interesting problem
(see below). The outline is completely for your benefit and is not graded. I will, however, provide
written feedback to projects, especially those that appear to be in trouble.
The final deliverables are due at the beginning of the last class on Saturday, April 12, 2012. The final
deliverables are in the form of PowerPoint slides and an in-class presentation. There is no formal
project write-up. That is, all your motivation, analysis, and recommendations must be contained
within the presentation. The presentation should be 15 to 20 minutes long and we will allocate an
additional 4 to 6 minutes for questions and comments from the class. I strongly encourage you to
include additional supporting charts, data, or analysis in an Appendix. The Appendix may contain
details that are unnecessary to discuss in the presentation but which are important for me to consider
in evaluating the project.
Project Requirements and Evaluation
The primary goal of the project is to apply the ideas covered in class. Each team should select an
interesting problem and analyze the pricing decision faced by a firm. The pricing problem could be
one currently or previously faced at work.
The project will be evaluated on the following criteria:
1. Is the project interesting?
In evaluating the interestingness of the project, I will consider the following general criteria:
Is this problem of interest to a manager in this particular field?
Your target audience for the project is a manager in the relevant area and your analysis should
help inform this person’s decision. Timeliness of the problem will be one relevant criterion.
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Prof. Brett Gordon
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Why is this pricing problem non-trivial?
The answer to the pricing problem should not obvious based on some existing pricing policy.
Among the alternative strategies a firm could use, there should be some level of support for at
least two strategies. If there is only one strategy that makes reasonable sense, then the
question may be too simple for the project. For example, in the auto industry some firms use
no-haggle pricing, some firms negotiate, and others use a mix of both strategies. An existing
car dealership may want to examine their current pricing policy relative to these options. Each
policy has its own set of pros and cons, and the best strategy is likely to depend on a number
of dealership- and market-specific factors.
What information (e.g., data, articles, etc.) is available to support the analysis?
Actual pricing and sales data are not required, but one can clearly make a stronger case with
this data. Public sources of data (e.g., newspapers, magazines, financial disclosures,
marketing research reports, etc.) are sufficient provided they contain some detailed
information about specific firms and the industry.
You may also consider using a survey or interviews to collect additional data. You can easily
survey students in class using Qualtrics or on campus. I understand the student population is
unlikely to be representative of your target population, but this is OK. In many situations,
students have also conducted interviews with managers to collect data. A good source of
interesting pricing problems is projects from your own work experience. If the corresponding
pricing data are confidential, it can easily be disguised in some fashion.
2. Analysis
In general, your analysis should involve taking concepts covered in the course, applying them
to the problem at hand, and developing a sensible pricing strategy. You are free to use
additional tools (e.g., regression, break-even analysis, conjoint, etc.) as part of your analysis.
Your analysis should cover, but not be limited to, the following points:
Customers and demand
 Who are the customers? Potential customers? Who are the competitor’s customers?
 Segmentation
 Price sensitivity
Competition
 Who are the competitors? Our relative strengths and weaknesses?
Costs (if you can get these)
 What is this firms’ cost structure (variable vs. fixed)? What are other firms’ costs?
Resources
 What resources does this firm bring to the table?
 Opportunities for price customization
 Integration of pricing policy with other elements of the marketing mix
 Implementation – logistics, organizational issues, sales force
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Prof. Brett Gordon
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Overall, I am looking for a clear and compelling analysis of the problem with conclusions that are
well supported by facts and logical reasoning. You should advocate a specific policy and provide
evidence to support your position; policies that do not commit to a specific strategy are strongly
discouraged. A thorough analysis would also clearly indicate why alternative policies are dominated
by the recommended policy.
Topic Ideas for the Final Project
1. Product lifecycles have shrunk in recent years due to rapidly shifting customer
preferences, product proliferation and technological advancements. Pricing is a
particularly important and complex issue for short-lifecycle products – i.e., products that
become obsolete within 6 months – 2 years of introduction. Profile the pricing practices at a
company that operates in a short-lifecycle environment – e.g., technology, fashion,
entertainment or information contexts. How does the company adjust prices as the product
evolves from one stage to the next, as the demand/supply balance changes, or as customers’
value for the product changes? Where within the organization are markdown/promotion vs.
introductory price decisions made? What role do channel partners play in managing price
across the lifecycle? How are customer expectations managed vis-à-vis price changes? What
practical issues does the company face in implementing advanced pricing practices? What
opportunities do you see for further improving pricing practices?
2. Some industries are experiencing major forces of change that are leading to the
adoption of new pricing practices. Examples of such forces include deregulation, entry of
low-cost competition, technological innovation, and transition from one stage to the next of
the industry/product lifecycle. Identify an industry that is witnessing such changes in pricing
caused by environmental forces. Profile the changes in pricing that are being driven in the
industry and the strategies being adopted by different players. Who is being successful at
capturing additional value – across competitors, and across the value chain? Is the industry
converging to a stable new pricing regime or is it moving into relatively anarchic conditions?
What factors are causing the industry to evolve in this fashion? What efforts are industry
players making to enhance their organizational effectiveness to price in the new environment?
3. Identify a company that has a reputation in its industry for being smart at pricing.
Profile its pricing practices – strategy, organization, implementation. Why has its competition
not been able to mimic its success? How much value is smart pricing adding? What insights
can other businesses (beyond this industry) draw from this company?
4. Identify a situation where a company or an industry moved from a “one-size-fits-all”
approach to pricing to a segmented pricing approach. What triggered the shift? How
successful has it been? What practical challenges came up in making the transition and how
were these addressed? How much value has been created by the shift to segmented pricing?
What integrated strategies across the 4P’s were needed to implement the change? What other
improvements can you suggest in how the company/industry should approach pricing?
5. Pricing optimization systems are gaining steam in the retail sector. Demand-Tech, KhiMetrics, ProfitLogic and Manugistics are among the players that have introduced systems to
help retailers optimize pricing for countless product categories. Pick a retail segment and
analyze the impact pricing optimization has – and will – have on the industry. How much
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Prof. Brett Gordon
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value is being created? What are the risks, and how could these be mitigated? How could
you tell if this is the right time to invest in this capability or not for a player in this segment?
What aspects of pricing will pricing optimization automate, and where is managerial
involvement still critical? What do you foresee the scope and impact of pricing optimization
to be in 5 to 10 years within this segment?
6. Managing pricing coherently across channels is a particularly tough challenge for
brands that are distributed via multiple channels – common problems include gray
markets, and the conflict between a direct channel, such as the web, with indirect channel
partners. Identify a company that has actively worked on addressing pricing challenges
across channels. What factors were behind these challenges (e.g., self-interested behavior of
channel partners)? How did the company address these issues? How successful has its
approach been? Are there other actions it could have taken that you would recommend?
What insights can this offer to other businesses in the same or other industries?
Note that the questions in each topic are meant to be suggestive, not exhaustive. You should feel free
to add additional analyses/ areas of discussion within the chosen theme – the key is to unearth
insightful findings and conclusions founded on real-world observations and linkages with pricing
concepts.
The quality of learning that team presentations generate is substantially shaped by the richness of data
– qualitative and quantitative – they acquire and the rigor with which they support their conclusions
with facts. Teams are encouraged to be creative in identifying and tapping data sources, such as press
articles, analyst reports, market research studies, customer interviews, and interviews with industry
participants (including channels).
Connections with the Core
This class builds upon the knowledge from the marketing core course on the fundamentals of pricing
and on the development of optimal price structures. The course also relies on your knowledge of
statistics and decision models. In particular, your knowledge of regression and optimization, and the
skills that you acquired in using Excel for this topic will be valuable in dealing with data and deriving
optimal price structures.
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Prof. Brett Gordon
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SCHEDULE OVERVIEW
Session
Topic
Cases Discussed
1 – Jan 10
Course Introduction
Value Pricing Framework
Colonial Homes
2 – Jan 11
Application of Value Pricing
Costs for Pricing
Behavioral Pricing
Curled Metals
Wendy’s Chili
3 – Jan 24
Price and Promotion Response using Surveys
Conjoint and Market Simulations
Springfield Nor’easters
4 – Jan 25
Price and Promotion Response using Aggregate
Data
5 – Feb 7
Price and Promotion Response using IndividualLevel Data
Revenue Management (Guest speaker)
6 – Feb 21
Price Experiments
Overview of Price Customization
7 – Feb 22
Due
SA1: Curled Metals
Tupelo Medical
Devices
SA2: Regression
Pricing Complements and Customer Lifetime
Value
Bundled and Nonlinear Pricing
Keurig at Home
IW: Keurig at Home
Project Proposal (optionally
due on 2/28/13)
8 – Mar 8
Price Customization with Retail and Trade
Promotions
Culinarian Cookware
SA3: Culinarian Cookware
9 – Mar 22
Managing Competitive Dynamics
10 – Apr 4
Guest Speaker
Negotiated B2B Pricing
Pricing Predicament
Fabtek (B)
11 – Apr 5
Integrative Case
Legal Issues in Pricing
Course Summary
XM Satellite (A)
12 – Apr 12
Project Presentations
GW: XM Satellite (A)
Final Project
Notes:
 SA# indicates a short assignment to be done individually
 IW indicates a case write-up to be done individually
 GW indicates a case write-up to be done in your project group
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Prof. Brett Gordon
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Module I: Understanding Customers and Demand
Session 1
Course Introduction and Value Pricing Framework
Jan 10
Overview
We will begin with a discussion of the Colonial Homes case. We will then focus on the role of
pricing in value creation and discuss the increasing importance of pricing in today’s markets. The
second half of the lecture will focus on reviewing the concept of economic value to the consumer
(EVC) and its various applications.
Required Reading
 Case: Colonial Homes
 “Executives Zero in on Price,” WSJ, Sept. 27, 2010.
 “The Price is Really Right,” Business Week, March 2003.
Optional Reading
 “Customer Value Propositions in Business Markets”, HBR, 2006.
 NHZ: skim Chapter 1.
Preparation Questions
 Regarding Colonial Homes:

o
Suppose that Colonial stayed with Davey’s as their sole supplier. Should Colonial change their
prices? If so, by how much? Be able to defend your decision with some analysis.
o
Should Colonial stay with Davey’s or switch to Northland Build-It?
How might the concept of EVC differ in B2C vs. B2B settings?
Session 2
Application of WTP, Costs, and Behavioral Pricing
Jan 11
Overview
We will begin with a discussion of the Curled Metals case. The case will highlight the importance of
choosing a pricing strategy that is consistent with the firm’s overall marketing strategy. Next we will
briefly cover the relevant costs to consider when making pricing decisions in the short and long-run.
The second half of the session will explore behavioral pricing topics. This modifies our existing
framework where consumers focus on the economic value they receive from a product to one where
they focus on their perceived economic value. The discussion will cover loss aversion, which arises
from prospect theory, the roles of pricing cues and framing effects, and potential pitfalls to consider
when using these strategies to influence consumers’ perceptions and actions.
Required Reading
 Case: Curled Metals Inc.
 Case: Chili at Wendy’s.
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Prof. Brett Gordon
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


“Are we making money yet?” Inc., July 1996.
“Amazon Pays a Price for Marketing Test," LA Times, Oct 2, 2000.
“Variable-Price Coke Machine Being Tested,” NYT, Oct. 28, 1999.
Optional Reading
 “Note on Behavioral Pricing,” HBS 9-599-114.
 NHZ: Chapter 2 (pp. 17-37) and Chapter 9 (pp. 181-192).
Preparation Questions
 Read the Wendy’s Chili mini-case and prepare the question at the end of the text.
Session 3
Price and Promotion Response Using Surveys and
Conjoint and Market Simulations
Jan 24
Overview
We will start with an overview of the primary methods used to estimate a customer’s willingness-topay (economic value to the customer), which serves as a foundation for most analysis we will
conduct.
The first set of methods is especially appropriate when you are pricing for the first time because they
do not rely on existing sales data. We begin with a discussion of using surveys to recover WTP, the
appropriate design of such surveys, and a discussion of a survey used to recover WTP in the
Springfield Nor’easters case. The concept of the price elasticity of demand is central to this analysis.
In the second half, we will discuss conjoint analysis as a more structured alternative to standard
survey techniques. We will start with a brief review of conjoint (which you learned in the marketing
core), and quickly move to a discussion of how conjoint can be used to simulate various market
scenarios.
Required Reading
 Case: Springfield Nor’easters.
 “Conjoint Analysis: A Manager’s Guide,” R. Dolan, HBS, 1990.
 NHZ: Chapter 12 (pp. 282-298).
Preparation Questions
 Remind yourself of the formula for price elasticity of demand. In words, what does it mean?
 For the Springfield Nor’easters:
o Evaluate the research survey undertaken by the League Sports Association and by
Larry Buckingham. Consider each step in the process that led to the findings of the
survey. What concerns (if any) do you have about the various components of the
survey? What caveats (if any) might you want to highlight in your analysis?
o What do you consider to be the key findings of the research survey? Specifically,
consider what Buckingham learned about a prospective customer profile, pricing, and
single- versus season-ticket packages.
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Prof. Brett Gordon
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Session 4
Price and Promotion Response using Aggregate Data
Jan 25
Overview
This session and the next one focus on methods that help improve existing pricing practices. These
require some type of past sales information to learn about the WTP of your customers. In particular,
we will study how to estimate price elasticities and cross-price elasticities using regression, including
how to control for various other factors. We will also discuss how to use these estimates in a price
optimization.
Required Reading
 (none)
Optional Reading
 NHZ: Chapter 12 (pp. 270-282).
Preparation Questions
 Review the basics of regression analysis and how to run a regression in Excel (using the Data
Analysis add-in).
 Review the basics of hypothesis testing (e.g., standard errors, t-statistics, p-values, statistical
significance, etc.).
Session 5
Price and Promotion Response using
Individual-Data and Revenue Management
Feb 7
Overview
In the first half of the session, we will explore how to model individual-level data on consumer
choices via a discrete choice model. Such data is especially common in B2B markets where you have
access to customer-level account data, as well as in many online settings.
In the second half, we will be joined by John Kaufman, who is Executive Vice President of Business
Operations at Clear Channel. He will discuss the role of revenue management in the hotel, airlines,
and radio advertisement industries, drawing on his rich work experiences at American Airlines,
Priceline, Starwood Hotels and Resorts Worldwide and Extended Stay Hotels.
Required Reading
 Case: Tupelo Medical Devices
 “The Dynamics of Pricing Tickets for Broadway Shows,” NYT, Jan 13, 2005.
Optional Reading
 “A Step-by-Step Guide to Smart Business Experiments,” Anderson and Simester (2011),
HBR.
 “Big Retailers Put Testing to the Test,” CFO, November 2010.
 “An Introduction to Revenue Management,” van Ryzin & Talluri, Operations Research,
2005.
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Prof. Brett Gordon
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Preparation Questions
 Note there are no preparation questions for the Tupelo Medical Devices case. We will,
however, discuss the case during class.
Module II: Designing Price Structures
Session 6
Price Experiments and
Overview of Price Customization and
Feb 21
Overview
In the first half, we will learn how and why firms are increasingly using experiments to learn about
the best pricing strategies. An exercise will be distributed in class.
The second half will begin our study of segmented pricing strategies. We will study how firms can
benefit from such segmentation and the numerous techniques that are useful for discriminating
among customers.
Required Reading
 “EDLP, Hi-Lo, and Margin Arithmetic,” by Stephen Hoch, Xavier Dreze, Mary Purk (1994),
Journal of Marketing.
 “They're Watching You,” Economist, Oct 16, 2003.
Optional Reading
 NHZ: Chapter 2 (pp. 38-46) and Chapter 3 (pp. 47-70).
 “Victoria’s Secret May Be That Men Get a Better Deal”, Wall Street Journal, Jan. 3, 1996.
Preparation Questions
 As you read “EDLP, Hi-Lo, and Margin Arithmetic,” consider the following:
o How did they implement the experiment?
o How do they test EDLP versus Hi-Lo pricing?
o How do they obtain a simple elasticity based on the experiment?
o What are some of the problems they tried to address through the experimental design?
Session 7
Pricing Complements and Customer Lifetime Value
and Bundled/Nonlinear Pricing
Feb 22
Overview
In the first half, we will discuss how to price product lines in the particular setting of complementary.
The context will be the Keurig at Home case. In the second half, we will study how to design bundles
and how to set nonlinear pricing schedules.
Required Reading
 Case: Keurig at Home: Managing a New Product Launch.
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Prof. Brett Gordon
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
“Why Cable Companies Bundle Their Channels,” The New Yorker, Jan. 25, 2010.
Session 8
Price Customization with Retail and Trade Promotions
Mar 8
Overview
We will discuss how firms can use price promotions to manage prices in the short term. We will
study the different forms of sales promotions and how these impact category purchasing, brand
choices and store choices. We will also discuss the case Culinarian Cookware to establish a
framework for analyzing the impact of sales promotions.
We will also study the role of markdowns in retailing and the pros and cons of using EDLP and
Hi/Low strategies in retail settings.
Required Reading
 Case: Culinarian Cookware.
 “Is Groupon Ruining Retail?” NYT Mar. 16, 2011.
 “Competing Against Free,” HBR June 2011.
 “When Freemium Fails,” WSJ, Aug. 22, 2012.
Optional Reading
 “Trade Promotion: Essential to Selling through Resellers,” Ailawadi, Farris, and Shames,
Sloan Management Review, Fall 1999.
Session 9
Managing Competitive Dynamics
Mar 22
Overview
In this session we will discuss price wars, which destroy a significant amount of value for all firms
involved. We will cover several strategies that firms use to avoid price wars and how to escape them
should your firm fall into one.
Required Reading
 “Airlines Can Offer Lessons for Online Newspapers,” Gordon, Forbes.com, Feb. 23, 2010.
 “Priced to Go: The Amazon/Wal-Mart Price War,” Surowiecki, The New Yorker, Nov. 9,
2009.
 “A Lesson in Beer Pricing,” WSJ, January 31, 2013.
 “U.S. Sues to Block Big Beer Merger,” WSJ, January 31, 2013.
Optional Reading
 NHZ: Chapter 11.
Preparation Questions
Pricing Strategies
Prof. Brett Gordon
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
The airline industry has been extremely successful (from a profit standpoint) in ushering in
new pricing practices. What behaviors or characteristics of the industry have helped produce
this success?
Session 10
Negotiating B2B Pricing and Guest Speaker
Apr 4
Overview
In the first half, we will explore pricing issues in B2B contexts. We will discuss how firms can target
prices based on past history of purchasing. We will also study how to structure and manage price
negotiations, using the cases, Fabtek (B) and “The Case of the Pricing Predicament”.
Next we will hear from Alan Fortier, the founder of Fortier and Associates, a pricing consultancy.
Alan will share his nearly 30 years of experience working in pricing.
Required Reading
 Case: FabTek (B).
 Case: The Case of the Pricing Predicament.
 “The Steve Jobs Emails That Show How to Win a Hard-Nosed Negotiation,” Business Insider
(2013).
Optional Reading
 “Airbus and Boeing Duke it Out to Win Lucrative Iberia Deal,” WSJ, Mar 10, 2003.
 “How to Master the Art of Negotiating Price,” WSJ, Mar. 22, 2011.
 NHZ: Chapter 5 (pp. 99-108).
Preparation Questions
 For Fabtek, suppose you are Amy Vitali, the Vice President of Marketing at Fabtek. Consider
the following questions:
o How are you going to respond to Cal Keating’s request?
o If you are going to fix the problem, how much will you charge? Why?
 For Pricing Predicament, suppose you Tony Della Pena, the regional manager at Standard
Machine Corporation. After reading the case and the conclusions of Scott Palmer, consider
the following questions:
o How would you summarize the situation to Bob Davis, the corporate vice president for
sales?
o What recommendations would you make to Mr. Davis? That is, what package would
you offer (if any)? Why?
Session 11
Integrative Case, Legal Issues in Pricing,
and Course Summary
Apr 5
Overview
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Prof. Brett Gordon
Page 14
In the first half of the session, we will discuss the integrative case, XM Satellite Radio, which ties
together many of the fundamental concepts we have covered in the course. A key question in the case
is the choice of a revenue model: whether XM can make money only using subscriptions or jointly
from subscriptions and advertising.
In the second half, we will cover legal and ethical issues pertaining to pricing, extending our
discussion from the previous session on anti-competitive tactics to other settings. We will then review
the course.
Required Reading
 Case: XM Satellite Radio (A).
 “U.S. Judge Rules Apple Colluded on E-Books,” WSJ, July 10, 2013.
 “Fixing for a Fight”, Economist, April 20, 2002.
 “Supermarket Sweep”, Economist, May 1, 2008.
Optional Reading
 NHZ: Chapter 13.
Preparation Questions
 In “U.S. Judge Rules Apple Colluded on E-Books,” the article mentions “most-favored
nation” clauses. What exactly are these clauses and how did they benefit Apple? That is, what
behavior did the clauses help to ensure among the collusive firms (Apple and the publishers)?
Session 12
Project Presentations
Apr 12
Overview
Groups will present their final projects to the class. All groups are required to submit to me complete
hardcopies of their slides, including any relevant appendices, for grading purposes.
Be mindful of the time limit and plan your slides accordingly.
Preparation Questions
 Simply come prepared to ask your fellow classmates insightful questions about their projects.
Pricing Strategies
Prof. Brett Gordon
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