MKT 6336.

501
PRICING
The University of Texas at Dallas
Spring 2005, SOM 2.903, Tuesday 7-9:45 pm

Instructor

Ashutosh Prasad, Ph.D. TA: Manish Gangwar

Office:SOM 3.221 Office: SOM 3.704
Office hours: Wed 4-7 pm Office hours: TBA
Phone: (972) 883-2027 (972) 883-4743
Email: aprasad@utdallas.edu manish.gangwar@student.utdallas.edu

Objective

Pricing is the element of the marketing mix that determines revenues and profits.
However, even large firms frequently price suboptimally. We will examine
microeconomic, strategic and psychological considerations in determining the correct
pricing for products and services. We will cover price-setting techniques in various
monopoly and competitive situations. There are many different pricing strategies -
skimming, bundling, versioning, auctions etc. - that will be covered together with a
discussion of the circumstances under which to use them. The course will use a
combination of lectures, discussions, and exercises. It is an essential course for managers
who ultimately have to set prices, and for marketing consultants.

Course Prerequisites: MKT 6301 or written permission from the instructor.

Course Material

Textbook
Power Pricing, by Robert Dolan and Herbert Simon. Publisher: Free Press 1996.

Cases
American Airlines Value Pricing (A), Harvard Business School Case
Cambridge Software Corporation, Harvard Business School Case
The case packet should be available from Off-Campus Books.

Overheads
Overhead slides in MS PowerPoint are available from the webpage
www.utdallas.edu/~aprasad/teaching.html.
The login and password will be announced in class.
Homework questions are available on the same page.

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Optional Readings
The following are optional readings. They are available from the UTD library or full-text
online from the UTD library web page.

Ashenfelter (1989), “How auctions work for wine and art,” Journal of Economic
Perspectives 3, 3, 3-22.
Davey, Childs, Carlotti Jr. (1998), “Why your price band is wider than it should be,”
McKinsey Quarterly, 1998, 3, 116-127.
Eppen, Hansen, Martin (1991), “Bundling – New products, new markets, low risk,” Sloan
Management Review, Summer, 7-14.
Garda (1992), “Tactical pricing,” McKinsey Quarterly, 1992, 3, 75-85.
Jones (1975), “A survey technique to measure demand under various pricing strategies,”
Journal of Marketing, July, 75-77.
Marn, Roegner, Zawada (2003), “The power of pricing,” McKinsey Quarterly, 2003, 1.
Marn, Roegner, Zawada (2003), “Pricing new products,” McKinsey Quarterly, 2003, 3.
Rao, Bergen, Davis (2000), “How to fight a price war,” Harvard Business Review 78, 2,
107-115.
Shapiro, Varian (1998), “Versioning: The smart way to sell information,” Harvard
Business Review 76, 6, 107-115.
Thaler (1985), “Mental accounting and consumer choice,” Marketing Science 4, 3, 199-
214.

Evaluation

Homework (5 of 6) 50%
Midterm Exam 20%
Endterm Exam 20%
Attendance and class participation 10%

Any grade dispute should be submitted in writing within one week of the assignment of
the grade. Late homework submissions will not be accepted. The University policies on
scholastic dishonesty (http://www.utdallas.edu/student/slife/scholastic.html) will be
strictly enforced.

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 Class Schedule

& = Homework to turn in; DS = the textbook

Date Topic Readings Assignments Due
1 Jan 11 • Introduction to pricing • DS Chapters 1, 2
• Cost analysis, Break-even • Davey et al. 1998
analysis
2 Jan 18 • Excel & Calculus tutorial
3 Jan 25 • Conjoint analysis • DS Chapter 3

4 Feb 1 • Demand curve, elasticity • DS Chapters 3, 8 & HW 1 due

• Monopoly pricing • Jones 1975

5 Feb 8 • Product-line pricing • Thaler 1985

• Psychological pricing

6 Feb 15 • Competitive pricing • DS Chapters 4 & HW 2 due

• Game theory • Garda 1992
• Rao et al. 2000
7 Feb 22 • Review / guest lecture

8 Mar 1 Midterm Exam

Spring Break, March 7 - March 12

9 Mar 15 • Price customization • DS Chapter 5

10 Mar 22 • Versioning • DS Chapter 7 & HW 3 due

• 2-part tariff • Shapiro &Varian
1998

11 Mar 29 • Bundling • DS Chapters 9 & HW 4 due

Case: American Airlines • Eppen 1991
Value Pricing (A)

12 Apr 5 • Case: Cambridge • DS Chapter 10, 11 & HW 5 due

Software Corporation
• Dynamic pricing
• Pricing and promotion

13 Apr 12 • Auctions • Ashenfelter 1989 & HW 6 due

14 Apr 19 • Channel and delegation

• Synopsis and Review

15 Apr 26 End term Exam