Skimming may maximize profits in the market introduction stage for an innovation, especially if
A) there are few substitutes.
B) all customers are price sensitive.
C) competition is intense.
D) a price reduction will reduce goodwill.
E) demand is perfectly elastic.

Question

Quizplus · Accepted Answer

Skimming is a pricing strategy where a high price is set initially for a new product, which is gradually lowered as competition increases. This strategy works best when there are few substitutes available in the market. When there are few substitutes, customers are willing to pay a premium price for the unique features of the product. Moreover, skimming is effective only in the market introduction stage, and not in later stages when competition increases.

Skimming May Maximize Profits in the Market Introduction Stage for an Innovation