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Essay / Research Paper Abstract
This 3 page paper looks at some of the issues that would, or might, have been considered when Amazon decided in a price for their Kindle 2, including issues such elasticity, revenue maximization and the support of complimentary sales.
Page Count:
3 pages (~225 words per page)
File: TS14_TEkindle.rtf
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Unformatted sample text from the term paper:
the revenue that is desired and the positioning as well as the way that it may support other sales. It is also a new product in an existing range to
the way that this reflection the existing range is also a consideration. The way that price is set should be with an
understanding of pricing strategy as well as consideration of positioning. The first aspect to understand is that of price elasticity. Price elasticity of demand is based on the change that
will be seen in the demand for a product when the price changes. In most cases an increase in price will result in a decrease in demand. Amazon will want
high sales; this is a product that has already been established, and as such aggressive pricing to create a market is not needed. This means that there is the potential
to look at optimizing revenue or profit1, considering the different price points and the potential levels of sales. If the price is too low there is also the danger that
there will be a volume of sales that is too great and the firm may run out of stock. The price elasticity of demand can be used to calculate this,
based on sales figures from the Kindle 1. The product is the second in line and an improvement, therefore pricing also needs
to reflect positioning with a price point slightly higher than the Kindle 1, this will secure its position as a superior product. If a better product were sold at
a lower price there may be a potential to alienate the buyers of the first version of the gadget, and may result in some bad feeling, if the product is
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