Ramsey Prices

Posted in Finance, Accounting and Economics Terms, Total Reads: 1957

Definition: Ramsey Prices

Ramsey pricing is all about pricing product which are inelastic in nature with higher markup component. Here even with increase in prices customers are willing to buy such products as they are inelastic in nature.

In a monopolistic markets such pricing are implemented to maximize its profit.

Frank Ramsey came up with this pricing strategy in context with taxation. It suggested increasing taxes for products and services which are inelastic in nature and consumers will buy it anyways.

Eg: It is commonly used by government, public utilities, and telecom operators.

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