Open-ended questions1. Do you believe Walmart is engaging in predatory pricing with its $4 generic drug program? Why or why not? “Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market. Once competitors have been driven out, the firm raises its prices. This practice is illegal under the Sherman Act and the Federal Trade Commission Act.
To prove predatory pricing, the Justice Department must show that the predator—the destructive company—explicitly tried to ruin a competitor and that the predatory price was below the predator’s average variable cost.(BOOK)” I do not believe Walmart was engaging in predatory pricing with its $4 generic drug program, as they were only trying to provide a cheaper alternative for their low-income customers. Walmart is one of the only business able to offer such a cheap alternative because of their business is not only pharmaceuticals, but also food, retail, house goods, electronics, etc. “
Industry analysts speculate that Walmart is counting on customers like Ganci to spend the money they saved at the pharmacy on other products in the store. Walmart insists that it can earn a profit on the $4 prescriptions alone, however, since more expensive medications are not discounted. “It can only be in our program if it is profitable,” says Bill Simon, a Walmart CEO.”
Walmart seems to actually be doing their consumer’s a favor by uncovering the markup certain drug companies use,” When a generic drug is introduced, pharmacies can charge as much as they like for it. One study found that markups were often as high as 4,000 percent. Few people compare drug prices from one pharmacy to the next, so pharmacies are able to mark up prices substantially. Walmart’s prescription program seems to be raising consumer awareness as it demonstrates how low the prices of the drugs can go.”
5. Walmart is using which of the following pricing strategies with its $4 generic drug pricing policy? a. status quo pricingb. price skimmingc. penetration pricingd. All of the above6. Walgreens and CVS did not lower their generic drug costs because it would mean a drop in service quality, which they felt customers pay for. This is an example of a. pricing products too low.
b. a rebate.c. value-based pricing.d. a trade discount.7. The original $4 generic drug pricing would be considered which pricing strategy? a. single-price tacticb. bait pricingc. variable pricingd. price bundling8. Walmart says it is making a profit off the $4 prescriptions, but Frank Ganci’s testimonial about buying all of his other groceries at Walmart suggests that the $4 prescriptions could also be a. price-lining.
b. odd-even pricing.c. bait pricing.d. leader pricing.