In
microeconomics
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
, joint product pricing is the firm's problem of choosing prices for
joint product In Economics, joint product is a product that results jointly with other products from processing a common input; this common process is also called joint production.Wouters, Mark; Selto, Frank H.; Hilton, Ronald W.; Maher, Michael W. (2012): ''Cos ...
s, which are two or more products produced from the same process or operation, each considered to be of value. Pricing for joint products is more complex than pricing for a single product. To begin with, there are two demand curves. The characteristics of each could be different. Demand for one product could be greater than for the other. Consumers of one product could be more
price elastic than consumers of the other (and therefore more sensitive to changes in the product's price).
To complicate things further, both products, because they are produced jointly, share a common marginal cost curve. There are also complexities in the production function. Their production could be linked in the sense that they are bi-products (referred to as ''complements in production'') or in the sense that they can be produced by the same inputs (referred to as ''substitutes in production''). Further, production of the joint product could be in fixed proportions or in variable proportions.
See also
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Marketing
Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
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Pricing
Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...
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Production, costs, and pricing
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Cogeneration
Cogeneration or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time.
Cogeneration is a more efficient use of fuel or heat, because otherwise- wasted heat from elect ...
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Carnot method The Carnot method is an allocation procedure for dividing up fuel input (primary energy, end energy) in joint production processes that generate two or more energy products in one process (e.g. cogeneration or trigeneration). It is also suited to al ...
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Pricing