IMPROVED ESTIMATION OF PRICE SENSITIVITY

Given the instability of the growth stage of the life cycle, when new buyers and sellers are constantly entering the market, formal estimation of buyers' price sensitivity is often a futile exercise. Estimates of price-volume trade-offs during growth frequently rely on qualitative judgments and experience from trial-and-error experimentation. In maturity, when the source of demand is repeat buyers and when competition becomes more stable, one may better gauge the incremental revenue from a price change and discover that a little fine tuning of price can significantly improve profits. The techniques for making such estimates of price sensitivity are outlined in

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