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Essay / Research Paper Abstract
This 5 page paper is a critical review of a model of add-on pricing, looking at how the author; Ellison, is back up by empirical evidence and how some of the assumption may be wrong. The bibliography cites 4 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEaddprice.rtf
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Unformatted sample text from the term paper:
especially where they are at high levels, such as seen in hotels and the provision of complimentary services such as films or in room mini bars. With this we may
argue that the marginal cost of providing additional services is minimal, but is also a source of potentially profit. The customer, once making the base purchase, for example the hotel
room, then has little choice for the add-ons. If they want the additional services, facilities or characteristics they may often be limited for choice. For example, if a consumer purchases
the use of a hotel room, if they meant to watch movie. For many the choice will be to watch or not to watch, whereas at home they may have
more options or substitutions, such as renting a DVD or watching cable television. Furthermore, many others making a base purchase the add-ons
will be pushed at the time of the sale, giving the consumer little time for consideration or choice, with the purchase based on the base product these are then an
additional profit centre. The paper is based on this model; where a consumer will have two choices, to buy or not to buy. If they do not make a
purchase they are assumed to gain zero utility, giving no motivation to refrain form making a purchase. These are assumptions that are
required for the model to operate, and they may be argued as correct. Looking again at the hotel room example where a consumer is away from home and has no
alterative. The customer needs to find a place to stay, and as such they need to make a purchase. The argument that
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