A Gucci handbag may sell for $60 in Italy and $240 in the United States.It must add the cost of transportation,tariffs,importer margin,wholesaler margin,and retailer margin to its factory price.Gucci faces a ________ problem.

Question

Quizplus · Accepted Answer

The problem faced by Gucci is price escalation, which refers to the increase in price as a product moves through different stages of the distribution channel. Gucci's handbag sells for a higher price in the United States due to the additional costs associated with transportation, tariffs, importer margin, wholesaler margin, and retailer margin. This results in a price escalation, making the product more expensive in the U.S. than in Italy.

A Gucci Handbag May Sell for $60 in Italy and $240