Exists whenever consumers in different countries are charged different prices for the same product

Pricing Strategy

Price discrimination exists whenever consumers in different countries are charged

different prices for the same product or slightly different variations of the product. Price

discrimination involves charging whatever the market will bear; in a competitive market,

prices may have to be lower than in a market where the firm has a monopoly. Price

discrimination can help a company maximize its profits. It makes economic sense to

charge different prices in different countries. Two (2) conditions are necessary for

profitable price discrimination. First, the firm must be able to keep its national markets

separate. If it cannot do this, individuals or businesses may undercut their attempts at

price discrimination by engaging in arbitrage. Arbitrage occurs when an individual or

business capitalizes on a price differential for a firm’s product between two countries by

purchasing the product in the country where prices are lower and reselling it in the

country where prices are higher

Strategic pricing

The concept of strategic pricing has three (3) aspects, which refer to predatory pricing,

multipoint pricing, and experience curve pricing.

a. Predatory pricing

Predatory pricing is the use of price as a competitive weapon to drive weaker competitors

out of a national market. Once the competitors have left the market, the firm can raise

prices and enjoy high profits. For such a pricing strategy to work, the firm must generally

have a profitable position in another national market, which it can use to subsidize

aggressive pricing in the market it is trying to monopolize. Historically, many Japanese

firms were accused of pursuing such a policy. The argument ran like this: Because the

Japanese market was protected from foreign competition by high informal trade barriers,

Japanese firms could charge high prices and earn high profits at home. They then used

these profits to subsidize aggressive pricing overseas, to drive competitors out of those

markets. Once this had occurred, so it is claimed, the Japanese firms then raised prices.

Matsushita was accused of using this strategy to enter the U.S. TV market. As one of the

major TV producers in Japan, Matsushita earned high profits at home. It then used these

Which of the following exists whenever consumers in different countries are charged different prices for the same product?

Which kind of strategy do firms in consumer goods industries that are trying to sell to a large segment of the market generally favor?

Which strategy refers to the means that a firm chooses for delivering a product to its consumer?

Which of the following allows a firm to educate potential consumers about the features of a product?