How does pricing elasticity affect decisions in BSG?

Pricing elasticity plays a crucial role in guiding pricing strategies within the Business Strategy Game (BSG). This concept refers to how sensitive consumers are to changes in price. When demand for a product is elastic, even a small change in price can lead to significant changes in the quantity demanded. Conversely, if demand is inelastic, consumers are less sensitive to price adjustments, meaning a change in price may not substantially affect the quantity sold.

Understanding pricing elasticity allows companies to optimize their pricing strategies effectively. For instance, if a company knows that demand for its product is elastic, it might avoid raising prices too high, as this could lead to a steep decline in sales. On the other hand, if demand is inelastic, the company could potentially increase prices with less risk of losing customers, thereby improving profitability.

This understanding of consumer behavior directly influences decisions related to pricing, market positioning, and revenue management strategies in the BSG simulation. Ultimately, the awareness of how demand will react to price changes equips teams with the necessary insights to make informed and strategic pricing decisions that align with their overall business goals.