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Dear John sir,
The following statements have been made about the tabular method used to establish an optimum price:
The tabular method is only suitable for companies operating in a monopoly.
Hope you are doing well. I was curious to understand why this statement is true? As in why monopoly only??
Much appreciate!
With tabular (and algebraic pricing) we assume that a lower price means more sales (and vide vera). However as I explain in my free lectures, we are not referring to a lower price ‘stealing’ sales from competitors – that would not happen (certainly in the longer term) because if we charge less then our competitors will also charge less as well rather then lose sales.
The assumption only works when we have a monopoly and it is a product that is price sensitive. So if, for example, you like buying oranges (which are not essential) and there is only one supplier, then if they get cheaper you are likely to buy more but if they get more expensive you are likely to buy less.
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