Last week, you learned the concept of "elasticity". This week, you will evaluate and discuss its relevance as you compar
Posted: Thu Jun 09, 2022 4:19 pm
Last week, you learned the concept of "elasticity". This week,
you will evaluate and discuss its relevance as you compare and
contrast two real-world decisions by two different companies.
Case 1: In July 2011, Netflix implemented a plan
to split up its DVD + instant streaming plan into 3 separate plans:
(1) DVD only, (2) streaming only, and (3) DVD + streaming. The
price for the DVD + streaming plan would be raised from $10 to $16.
The rate hike caused a loss of subscriber base to the tune of 1
million [reported in the following article in
the Huffington Post" http://www.huffingtonpost.com/2011/09/1 ... 64026.html ]
and a huge drop in the share price of Netflix. The company
defended its decision and implemented the change nonetheless.
Case 2: Around September 2011, Bank of America announced that,
beginning in early 2012, it would start charging its customers $5 a
month for using their debit cards [the following is an article from
the Christian Science
monitor: http://www.csmonitor.com/Business/2011/ ... t-card-use.
Following the tremendous backlash from credit card holders, the
company abandoned its plans and did not implement its new fee.
Required:
Compare and contrast the two cases.
What elasticity considerations
would Netflix and BankAm have considered in
their individual decisions? Why did they react differently to
essentially similar customer responses?
you will evaluate and discuss its relevance as you compare and
contrast two real-world decisions by two different companies.
Case 1: In July 2011, Netflix implemented a plan
to split up its DVD + instant streaming plan into 3 separate plans:
(1) DVD only, (2) streaming only, and (3) DVD + streaming. The
price for the DVD + streaming plan would be raised from $10 to $16.
The rate hike caused a loss of subscriber base to the tune of 1
million [reported in the following article in
the Huffington Post" http://www.huffingtonpost.com/2011/09/1 ... 64026.html ]
and a huge drop in the share price of Netflix. The company
defended its decision and implemented the change nonetheless.
Case 2: Around September 2011, Bank of America announced that,
beginning in early 2012, it would start charging its customers $5 a
month for using their debit cards [the following is an article from
the Christian Science
monitor: http://www.csmonitor.com/Business/2011/ ... t-card-use.
Following the tremendous backlash from credit card holders, the
company abandoned its plans and did not implement its new fee.
Required:
Compare and contrast the two cases.
What elasticity considerations
would Netflix and BankAm have considered in
their individual decisions? Why did they react differently to
essentially similar customer responses?