An MP3 player is sold at a price close to the break-even point, but the accessories for the product are priced at a premium, offering impressive contribution margins. This is an example of ________.
A)byproduct pricing
B)bundling
C)captive-product pricing
D)multiple-unit pricing

Question

Quizplus · Accepted Answer

Captive-product pricing involves pricing a main product low while pricing its necessary accessory at a higher price. This strategy is used to attract customers with the low price of the main product and then making a profit by selling the higher priced accessory. This is exactly what is happening in this scenario, as the MP3 player is sold close to break-even point while the accessories are priced at a premium to generate high contribution margins.

An MP3 Player Is Sold at a Price Close to the Break-Even