Student responses

DISCUSSION 1

The YouTube video for this week’s discussion posed a question on how to charge more than other sellers in a market without losing revenue. In summary, the advice given in the video discussed an approach utilizing Fiverr to increase revenue with packages that use “good, better, best pricing” (GaryVeeTV, 2017). Price elasticity of demand can increase revenue if packages are priced to encourage more purchases. For example, the video states packages can be priced in tiers so that fewer services are offered at the lowest tiers but priced so that more people can afford them. In addition, tiers priced higher would offer more services. If the lowest price results in poor revenue, markup pricing can occur to optimize price elasticity and quantity (Brickley, et al., 2016). Market power is a prime economic concept applicable to this topic because when barriers to entry exist in an industry, market power will allow a firm to “have a noticeable impact on prices” (Brickley et al., 2016, p. 201). On a platform like Fiverr, freelancers can exercise market power in monopolistic competition markets because many people offer similar services but different products. In very rare cases would a freelancer on Fiverr be associated with a monopoly market structure, as this would be more representative of entrepreneurs on Kickstarter who invent a new product that consumers have not seen before and are compelled to buy it.

Based on the guidance offered in the YouTube video, I do not believe a firm has to possess market power in order to raise prices. It is an unfortunate fact that piracy in the industry of intellectual property is not uncommon. Despite threats of lawsuits, fines, damages, and incarceration for copyright infringement, many firms have benefitted from this destructive practice in an effort to compete with firms that have market power (Gregory, 2018). An example of this was Napster who was unknown at the time of its inception in 1999, but grew to be a resource for peer-to-peer file sharing which was initially deemed illegal but now generates revenue under revised business practices that requires payment for a good. Although Napster began as a free service, it did not have market power against larger firms like Apple iTunes and grew to be a firm that can raise prices for revenue due to its notorious past and loyal end users who became its consumers.

DISCUSSION 2

After watching the video, the video divulges options and routes a business owner can pursue to increase their service price while maintaining consistent revenue. As we’ve learned from our prior chapters this is a very hard thing to do as the demand curve usually curves downwards; meaning as prices go up the quantity sold goes downward(2016). For my response, I totally agree that a firm must increase its market power in order to raise prices. There were many ways in which a firm could increase that marketing power as touched on within the video. In the video, they say “you have to be able to justify your higher price “. Meaning in a large market of related items you have to stand out. This means by having increased product performance, marketing, or more can justify your price increase; and if you listen/ watch your units sell you will be able to determine if it was a success or not (AskGaryVee, 2017).
Some more advice that was told within the video was the option of creating multiple packages. Creating an entry price point gives the firm the ability to match prices with other competitors, and still create revenue by selling units at a reasonable price (AskGaryVee, 2017). Creating other services or packages at a higher price point gives you the ability to experiment while giving the duality of still being able to garner credibility and marketing power.

Lastly, the video discussed the idea of demand Elasticity. Price changes are not final; with this in mind, a firm has the ability to fluctuate its prices, and determine the sensitivity of its demand slope as prices change (2016). “Demand elasticity measures the percentage change in quantity demanded given a percentage change in its price “, Says Zimmerman (2016). Experimenting and monitoring the slope curvature is the best way to determine your firm’s next move pricing-wise.

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In summary the advice given in the video discussed an approach utilizing Fiverr to increase revenue with packages that use “good better best pricing

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