When the Swiss watchmaker TAG Heuer quadrupled the average price of its watches, its sales volume jumped sevenfold. The likely cause of this volume increase is
A) because the watch market is highly conservative.
B) because economies of scale in production would be substantial.
C) because retailers are not willing to carry new brands of watches in this category.
D) because once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
E) because the watch category frequently uses prestige pricing, wherein lower prices may result in lower sales.

Question

Quizplus · Accepted Answer

Prestige pricing suggests that higher prices can increase demand for luxury goods, as they are perceived as more desirable or exclusive.

When the Swiss Watchmaker TAG Heuer Quadrupled the Average Price