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 ________.

Question

Quizplus · Accepted Answer

Price escalation refers to the increase in the final selling price of a product due to the costs of transporting, distributing, and promoting it in different markets. In this case, the Gucci bag is more expensive in the United States than in Italy because of the higher costs of exporting, importing, and marketing it overseas. This pricing strategy aims to offset the additional expenses and maintain the profitability of the company while catering to the different purchasing power and demand of the consumers in different regions. The other options are not appropriate since opportunity cost and transfer pricing refer to other concepts in economics, and market and tactical pricing do not capture the specific dynamics of pricing across countries.

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