Most core curricula in the Masters in Business Administration (MBA) programs include price topics in discrimination and market segmentation. Core managerial economics or marketing courses typically present the discussion and analytical tools used in companies for the purpose of third degree price discrimination, value based pricing and market segmentation decisions. This article adds to the existing literature in teaching third degree price discrimination and market segmentation by integrating social responsibility and ethics as a separate perspective.
The purpose of this teaching innovation is to provide students with an opportunity to consider various stakeholder perspectives in the context of a global pricing decision in a pharmaceutical market. Based on the case of Merck: Global Health and Access to Medicines (HBS 9-509-048), a three tier pricing policy is proposed. Students are assigned specific stakeholder perspectives. They are asked to develop a “fair” pricing scheme that provides meaningful benefits, ensures price discounts going to intended target markets, and balances a company’s short-term erosion of economic value against long-term strategic gains. We illustrate how integrating the topic of price discrimination and social responsibility in managerial decision-making can be used to increase student engagement and understanding of critical roles that various stakeholders play in the ability of companies to implement and define their pricing policy and achieve their goals. We show how innovative pedagogy enhances students’ ability to identify options for firms so that they can capture value in spite of often conflicting stakeholder objectives. We present the global pricing topic through an interdisciplinary session involving managerial economics and marketing faculty while explicitly directing students to use a utilitarian ethics perspective.
At Babson College, this exercise is part of an integrated case teaching session, which includes managerial economics and marketing faculty, but the exercise is directly transferrable to stand-alone courses. Our results show that students get a deeper understanding of the complexity of pricing decisions in a global context of providing medicines, where differences in perspectives of decision-makers and in the value of lives are explicitly taken into consideration. While many of the concepts of social responsibility normally discussed in the business programs usually take a backseat role, we demonstrate how the interactive and dynamic structure of this session provides students with a useful and tangible opportunity to simulate the complexities and realities of these types of business decisions.