How to calculate the tier prices in Magento

Magento supports tier prices feature and it allows the actual price to be determined by the quantities. This is a common sale promotion technique used by lots of Magento store owners.

Mageno product model Mage_Catalog_Model_Product has two methods which are related to tire prices:

/**
     * Get product tier price by qty
     *
     * @param   double $qty
     * @return  double
     */
    public function getTierPrice($qty=null)
    {
        return $this->getPriceModel()->getTierPrice($qty, $this);
    }

    /**
     * Count how many tier prices we have for the product
     *
     * @return  int
     */
    public function getTierPriceCount()
    {
        return $this->getPriceModel()->getTierPriceCount($this);
    }

From above-mentioned methods, we know that product's tire prices is determined by price model. Magento uses price factory design pattern to cover all kinds of product types: simple, configurable,group, virtual, downloadable.

 public function getPriceModel()
    {
        return Mage::getSingleton('catalog/product_type')->priceFactory($this->getTypeId());
    }

class Mage_Catalog_Model_Product_Type is a helper or utility class which can get all the product types information from configuration file and database.

    public static function priceFactory($productType)
    {
        if (isset(self::$_priceModels[$productType])) {
            return self::$_priceModels[$productType];
        }

        $types = self::getTypes();

        if (!empty($types[$productType]['price_model'])) {
            $priceModelName = $types[$productType]['price_model'];
        } else {
            $priceModelName = self::DEFAULT_PRICE_MODEL;
        }

        self::$_priceModels[$productType] = Mage::getModel($priceModelName);
        return self::$_priceModels[$productType];
    }

<product>
	<type>
		<simple translate="label" module="catalog">
			<label>Simple Product</label>
			<model>catalog/product_type_simple</model>
			<composite>0</composite>
			<index_priority>10</index_priority>
		</simple>
		<grouped translate="label" module="catalog">
			<label>Grouped Product</label>
			<model>catalog/product_type_grouped</model>
			<price_model>catalog/product_type_grouped_price</price_model>
			<composite>1</composite>
			<allow_product_types>
				<simple/>
				<virtual/>
			</allow_product_types>
			<index_priority>50</index_priority>
			<price_indexer>catalog/product_indexer_price_grouped</price_indexer>
		</grouped>
		<configurable translate="label" module="catalog">
			<label>Configurable Product</label>
			<model>catalog/product_type_configurable</model>
			<price_model>catalog/product_type_configurable_price</price_model>
			<composite>1</composite>
			<allow_product_types>
				<simple/>
				<virtual/>
			</allow_product_types>
			<index_priority>30</index_priority>
			<price_indexer>catalog/product_indexer_price_configurable</price_indexer>
		</configurable>
		<virtual translate="label" module="catalog">
			<label>Virtual Product</label>
			<model>catalog/product_type_virtual</model>
			<composite>0</composite>
			<index_priority>20</index_priority>
		</virtual>
	</type>
</product>

For simplicity, i prefer to use simple type product's price model to show you around.  class Mage_Catalog_Model_Product_Type_Price is the simple type product's default price model.

    public function getTierPrice($qty = null, $product)
    {
        $allGroups = Mage_Customer_Model_Group::CUST_GROUP_ALL;
        $prices = $product->getData('tier_price');
        $custGroup = $this->_getCustomerGroupId($product);
        if ($qty) {
            $prevQty = 1;
            $prevPrice = $product->getPrice();
            $prevGroup = $allGroups;
            foreach ($prices as $price) {
                if ($price['cust_group']!=$custGroup && $price['cust_group']!=$allGroups) {                    
                    continue;
                }
                if ($qty < $price['price_qty']) {                   
                    continue;
                }
                if ($price['price_qty'] < $prevQty) {                   
                    continue;
                }
                if ($price['price_qty'] == $prevQty && $prevGroup != $allGroups && $price['cust_group'] == $allGroups) {
                    // found tier qty is same as current tier qty but current tier group is ALL_GROUPS
                    continue;
                }
                if ($price['website_price'] < $prevPrice) {
                    $prevPrice  = $price['website_price'];
                    $prevQty    = $price['price_qty'];
                    $prevGroup  = $price['cust_group'];
                }
            }
            return $prevPrice;
        }
        return ($prices) ? $prices : array();
    }

The logic is very apparently because it fetches the tire prices set up by admin panel and compares the quantity to get the corresponding price.