case study 1
1. This case describes one reason manufacturers might want to offer rebates rather than decrease wholesale price. Explain why this can be viewed as an example of customized pricing.
The one-price-fits-all model is rapidly becoming extinct particularly in the world of e-commerce where every purchase and link clicked on (and much more) is stored, evaluated with the result being a customized price/offer based on many factors including credit score and buying habits. Rebates are an example of customized pricing because it draws in customers who won’t pay the retail price as well as those who would regardless of the rebate. Similar to Jockey’s pricing. Jockey underwear goes on sale every six months to meet high and low reservation-price customers. There people who will buy computer and underwear only when they need it. Others need to be dragged in by a sale or rebate. The dirty little secret about rebates is that 40% are unclaimed totaling a give back to retailers of $2 billion. This partly a “tax on the disorganized,” as the authors note, but retailers often make the rules for redeeming rebates so Byzantine that consumers give up or forget that their check never came because the application was rejected for some picayune reason. Such was the case of Samsung in New York. The company’s rebates for apartment dwellers weren’t processed because there was not a block to include apartment numbers on the rebate form. The state attorney general made Samsung pay up. I would like to see the stoutest libertarian read this case study and make a coherent argument against government regulation!
2. Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices? Retailers can claim full revenue on the books, and thus it appears as if they have cash flow they otherwise wouldn’t. This can drive up stock price as the rebates can be an expense that can be written off. Also, the rebate price still gets consumer in
The one-price-fits-all model is rapidly becoming extinct particularly in the world of e-commerce where every purchase and link clicked on (and much more) is stored, evaluated with the result being a customized price/offer based on many factors including credit score and buying habits. Rebates are an example of customized pricing because it draws in customers who won’t pay the retail price as well as those who would regardless of the rebate. Similar to Jockey’s pricing. Jockey underwear goes on sale every six months to meet high and low reservation-price customers. There people who will buy computer and underwear only when they need it. Others need to be dragged in by a sale or rebate. The dirty little secret about rebates is that 40% are unclaimed totaling a give back to retailers of $2 billion. This partly a “tax on the disorganized,” as the authors note, but retailers often make the rules for redeeming rebates so Byzantine that consumers give up or forget that their check never came because the application was rejected for some picayune reason. Such was the case of Samsung in New York. The company’s rebates for apartment dwellers weren’t processed because there was not a block to include apartment numbers on the rebate form. The state attorney general made Samsung pay up. I would like to see the stoutest libertarian read this case study and make a coherent argument against government regulation!
2. Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices? Retailers can claim full revenue on the books, and thus it appears as if they have cash flow they otherwise wouldn’t. This can drive up stock price as the rebates can be an expense that can be written off. Also, the rebate price still gets consumer in