Rev. 5th December, 2016.

Indian Institute of Management Rohtak

Post Graduate Programme in Management
Second Year Elective

Pricing

Instructor:

Prof. Rahul Kumar Sett

Fellow, IIM Ahmedabad
Email ID: rahul.sett@gmail.com

Course Design:

Setting the right price is fundamental to the long run sustainability and profitability of
firms. This requires firms to be cognizant of their purpose, their business environment,
market structure, consumer preferences, and their internal capabilities.

This course will help students to make good pricing decisions by developing their
theoretical and practical understanding of pricing strategies and techniques based on an
in-depth understanding of consumer preferences and the market structures. Revisiting the
standard price theory, grounded in economics, and enriching the same with the
knowledge of consumer preferences and choice from the behavioral sciences and
consumer psychology literatures achieves this.

Emphasis on an integrated and interdisciplinary approach towards price setting

throughout the course highlights the strategic aspects of pricing. This approach leads to
the development of a nuanced understanding of pricing decisions across various
industrial as well as consumer markets. Issues from the telecommunications,
pharmaceutical, and manufacturing industries are discussed among others. Special cases
including ethical considerations in pricing are also covered.

Pedagogy:

A mixed method, comprising of lectures, cases, in-class exercises, and simulations is

followed.

Expectations:

Participants are expected to thoroughly prepare the readings for each class. Active class
participation will be highly appreciated given the design of the course. Please remember
that the success of a good case discussion is directly dependent on your class preparation.
In essence if you are unprepared, you affect the entire class discussion. Hence a high
level of class preparation is expected from you, especially when cases will be discussed
in the class.

Ethics:

Please refrain from bringing cell phones to the class. Please be on time for every class.
Attendance is compulsory. Academic malpractices will be treated with all seriousness.

Evaluation Components:

§ Unannounced Quizzes: 25 %
§ Class Participation: 25%
§ End Term Examination: 50%

References:

§ Monroe, Kent B. (2003). Pricing, New York: McGraw-Hill Irwin.

§ Pindyck, Robert, and Rubinfeld, Daniel (2012). Microeconomics (8e), New Delhi:
Pearson.
§ Nagle, Thomas, and Holden, Reed K. (2002). The Strategy and Tactics of Pricing.
New Jersey: Prentice Hall.
§ Kaplan, Robert S., and Cooper, Robin (1998). Cost and Effect. USA: Harvard
Business School Press.
§ Philips, Robert (2005). Pricing and Revenue Optimization. California: Stanford
University Press.

Abbreviations:

§ Case: C
§ Compulsory Reading: R
§ Optional Reading: OR
§ Lecture: L
§ Simulation: S
§ Movie: M
 Session Plan

Session 1 & 2: Introduction to Pricing

§ L: Consumer Preference and The Law of Demand
§ L: Revisiting the Standard Assumptions of Consumer Preference
§ L: Enriching the Standard Theory of Consumer Choice
o Augmented theory of consumer choice based on consumer psychology
and behavioral economics
§ R: Pricing Strategy
§ R: Pricing it Right: Strategies, Applications, and Pitfalls
§ R: Pricing Metrics and Concepts
§ R: Precision Pricing

Session 3 & 4: Price Discrimination and Pricing under Evolving Market Structures
§ C: Omnitel Pronto Italia
o Pricing of mobile telecommunications services in a new market, and
strategic aspects of pricing
o S: Vensim Simulation of Price Response

Session 5: Indirect Price Discrimination and Bundling

§ L: Fundamentals of Bundling
§ R: Chapter 11 of Microeconomics (8e) (2012) by Pindyck, Robert, and Rubinfeld,
Daniel, New Delhi: Pearson.

Session 6 & 7: Behavioral Aspects of Pricing

§ L: Reference Dependence and Decision Biases, and Pricing Implications
§ R: Note on Behavioral Pricing
§ R: Customer Behavior Aspects of Pricing
§ R: Pricing and the Psychology of Consumption
§ R: How to Stop Customers from Fixating on Price
§ OR: Prelec, D., & Loewenstein, G. (1998). The red and the black: mental
accounting of savings and debt. Marketing Science, 17(1), 4–28.

Session 8 & 9: Pricing Analytics

§ R: A Price Response Model Developed from Perceptual Theories by John D. C.
Little
§ R: Chapter 1: Theory of Pricing Analytics
§ R: Chapter 2: The Practice of Pricing Analytics
§ OR: Chapter 3: Dynamic Pricing and Markdown Optimization

Session 10 & 11: Strategic Aspects of Pricing

§ C: Federated Industries (A)
§ R: Making Money with Proactive Pricing

Session 12 & 13: Pricing in the Pharmaceutical Industry

§ C: Fighting AIDS and Pricing Drugs
§ L: Ethical Considerations in Pricing
o R: Note on Conflict Diamonds
o M: Blood Diamond
§ Course Review
o R: How do you Know When the Price is Right?
§ New Frontiers in Creating and Capturing Value
o OR: Creating Shared Value
o OR: Pricing to Create Shared Value