BUAD 307
Marketing
Fundamentals

 

 

 

FINAL EXAM REVIEW

Marketers and Economists: Contrasting Perspectives

PowerPoint Narration

Economists generally assume—quite unrealistically—that consumers have perfect information about:

  • The quality of all brands available.
  • The price charged by each retailer for each respective brand.

Economists contend that although these assumptions are unrealistic, they nevertheless yield accurate predictions. 

In marketing, however, it is recognized that consumers are often hit with considerable information overload and that, in practice, finding out all this information can be quite difficult and costly.   This results in certain phenomena:

  • In some cases, consumers will infer that a higher priced product is of higher quality.
  • Consumers have imperfect memories of prices previously observed and paid.
  • Consumers, in some cases, do not accurately compute prices.  It has been found, for example, that many consumers will tend, without doing the calculations, to buy larger sized packages under the assumption that there will be a “quantity discount.”  In fact, per unit costs for larger packages are often higher.

Economists, of course, base most of their conclusions on the idea of an equilibrium of supply and demand:

This idea is generally valid, but it does not explain the entirety of consumer choices and firm pricing strategies.