Optimal pricing strategies: how to ride herding, social influence and brand devotion

Abstract

The aim of this dissertation is to show how multinational companies when determining their pricing strategies are influenced not only by the characteristics of the market itself (quantities, prices, degree of competition, barriers to entry, and the like) when determining their pricing strategies as taught by the classical and neoclassical economic theory, but they also take into consideration the human condition and in particular how the product is seen to affect the social condition of the consumer. An in depth analysis of the theoretical background on irrational decision making will be made in order to discover what herding, social influence and brand devotion are, how they originate and how they affect consumers' decisions. A model will be presented to study companies' pricing strategies referring to some real life case studies, and question whether they can be considered optimal in relation to the forces other than price and quantity that affect demand.