alternative pricing strategy , in cost based pricing what does mark up price mean and how is it decided?
cost based pricing is nothing but Cost +reasonable rate of return. The best example is power sector. In india whatever tariff gets charged from the customer is cost based i.e. the company will charge u the cost of providing services (including cost of setting up the power plant etc) + a reasonable rate of return which is currently fixed by the regulator in India at 15.xx%. In fact most of the pricing here in economics(Ct7) can be understood using electricity as example. For example, the transmission lines are to some extent natural monopoly. Similary peak load pricing is nothing but the fact that people use more electricity from x to y hrs so the cost of electricity consumption is more. Hope it helps.
