Experience-curve pricing assumes that ________.
A) competitors are weak and not willing to match price cuts
B) competitors are strong and invincible
C) aggressive pricing adversely affects product image
D) volume-based production slows down organizational learning
E) lower-cost technologies are almost always inferior

Question

Quizplus · Accepted Answer

Experience-curve pricing assumes that competitors are weak and not willing to match price cuts. This is because experience-curve pricing relies on the concept that as production levels increase, costs per unit decrease, allowing for price reductions while still maintaining profitability. If competitors are strong and invincible, they may match or beat the lower prices, leading to a price war and potentially damaging the product's image. Therefore, experience-curve pricing is most effective when a company has a strong competitive advantage that allows them to offer lower prices without risking retaliation from competitors.

Experience-Curve Pricing Assumes That ________