When firms pioneer the development of a new product-market,they may set the price very high and appeal to only the least price-sensitive segment of potential customers in order to maximize short-term profits.This is a _____.

Question

Quizplus · Accepted Answer

This is a skimming price policy, where the firm sets a high price to skim maximum profits from the least price-sensitive customers. This is usually done in the short term until competition and demand increase. Penetration pricing is opposite to skimming pricing, where the firm sets a low price to penetrate the market quickly. Harvesting policy is when the firm keeps milking the product with minimum investment or marketing efforts until the product dies, and survival is not related to this scenario.

When Firms Pioneer the Development of a New Product-Market,they May