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date: 14 April 2021

Abstract and Keywords

Different approaches to pricing are used in different industries. This article explores the question of why this disparity in pricing mechanisms exists and persists – even among markets that often appear superficially very similar. It defines the concept of a pricing modality, the way that buyers, sellers, and intermediaries interact in a market to determine the price for a particular transaction. The article is organized as follows. Section 2.2 discusses three different approaches to explaining and understanding the reasons why particular modalities hold in particular markets. Sections 2.3 and 2.4 discuss two markets – pricing for television advertising and pricing of movie tickets in the United States – in which arguments from economic equilibrium are seemingly unable to explain the predominant pricing modalities. Section 2.5 discusses the rise of fixed pricing as the dominant modality for retail transactions. This history is interesting because of the extent to which fixed pricing has become the standard for ‘fairness’ in retail pricing. The final section summarizes the main points.

Keywords: price setting, pricing modality, television advertising, movie tickets, fixed pricing, retail pricing

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