Which of the following statements is not correct regarding a "damaged goods strategy"?
A)A damaged good strategy is an example of "versioning".
B)A damaged good strategy can be an example of third-degree price discrimination.
C)A damaged good strategy can be an example of "building fences".
D)A damaged good strategy is generally less profitable than a uniform pricing strategy for a high quality product.

Question

Quizplus · Accepted Answer

A damaged goods strategy involves intentionally producing a lower quality product to sell at a lower price, while still maintaining a higher quality product at a higher price. This is an example of versioning and can be a form of third-degree price discrimination. Building fences involves creating barriers to prevent customers from switching to a competitor's product. However, a damaged goods strategy may still be profitable depending on the market and the price elasticity of demand for the different versions of the product. Therefore, statement D is not correct because a damaged good strategy can be more profitable than a uniform pricing strategy in certain situations. A damaged good strategy is typically used for lower quality products or products with minor defects, as the discounted price can still attract customers. Therefore, a high quality product with intentional damages may not be as profitable as selling it at a uniform price without any damages.

Which of the Following Statements Is Not Correct Regarding a "Damaged