What is meant by market skimming?
A) The strategy of setting a higher price for a good than for close substitutes of the good, based on product differentiation.
B) The strategy of combining several products in the market such that the consumer cannot buy the goods individually.
C) The strategy of setting a price that is lower than the current market price in order to undercut competing firms.
D) The strategy of setting a higher price for a good when it is first introduced in the market and then gradually lowering the price.
E) The strategy of setting a low price in order to induce consumers to buy the good and then consequently increasing the price.

Question

Quizplus · Accepted Answer

Market skimming is the strategy where a company sets a higher price for its product when it's first introduced in the market, and then gradually lowers the price over time. This strategy is used for products that are highly differentiated, unique, and have few close substitutes. By setting a high price initially, the company looks to recover its development costs quickly, and the early adopters of the technology or product are typically willing to pay a premium. As the product matures and more competitors enter the market, the company can lower the price to attract more price-sensitive customers.

What Is Meant by Market Skimming