ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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charging wealthy customers higher prices than other customers
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charging high prices for status products
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negotiating prices at a swap meet
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selling a football jersey for $19.99
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Detailed explanation-1: -Nike is a perfect example of a company that effectively uses prestige pricing, which is a pricing strategy where prices are set higher than normal because lower prices will actually hurt sales.
Detailed explanation-2: -Prestige pricing strategies and examples Example: A designer shoe company announces a new line of shoes named after a specific athlete. If the company announces a limited edition of such a shoe with a limited production run, the shoe company may charge a premium price for the same shoe.
Detailed explanation-3: -These are called prestige (or status, or positional) goods. Jewelry and fashionable clothing, luxurious homes and cars, and extravagant entertainment are examples of these prestige goods.
Detailed explanation-4: -Prestige pricing is a marketing and pricing strategy where prices are consciously kept higher than normal, recognizing that lower prices will inhibit sales and buyers will associate a high price for the product with superior quality.
Detailed explanation-5: -Price skimming Companies use price skimming when they are introducing innovative new products that have no competition. They charge a high price at first, then lower it over time. Think of televisions.