A Gucci bag sells for $120 in Italy and $240 in the United States due to the differences in the costs of distributing the product in the two countries.This phenomenon is called a ________.

Question

Quizplus · Accepted Answer

The phenomenon described is known as price escalation problem, which refers to the increase in price of a product as it moves through different channels of distribution, often due to added costs such as transportation, tariffs, taxes, and other fees. The pricing problem is not strategic, tactical, or market-related, and there is no evidence of transfer pricing involved in this scenario.

A Gucci Bag Sells for $120 in Italy and $240