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Pricing Policies and Strategies

Elastic Demand

the percentage change in quantity demanded is greater than the percentage change in price

Inelastic Demand

A situation in which an increase or a decrease in price will not significantly affect demand for the product

Unitary Elasticity

a situation in which total revenue remains the same when prices change

The Sherman Act

act which helped to eliminate monopolies in the United States

The Robinson-Patman Act

Was called the Chain Store Act. It was to protect independent retailers or wholesalers from unfair discrimination by chain stores.

Price Skimming

A strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price sensitive segment.

Penetration Pricing

Pricing strategy in which the seller charges a low price on a new product to discourage competition and gain market share.

Cost-Based Pricing

setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk

Competition-Based Pricing

a pricing strategy based on what all the other competitors are doing. The price can be set at, above, or below competitors' prices.

Demand-Based Pricing

pricing that is determined by how much customers are willing to pay for a product or service

One-Price Policy

offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities


A pricing policy that allows customers to bargain for price

Geographic Pricing

reductions for transportation and other costs related to the physical distance between buyer and seller

Unit Pricing

a strategy for recognizing the relative cost of a product based on the cost on standard unit such as an ounce or gram

Prestige Pricing

charging a high price to help promote a high-quality image

Odd-Even Pricing

setting prices a few dollars or cents under an even number

Price Lining

the practice of offering a product line with several items at specific price points

Leader Pricing

a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store


amount by which original price is increased

Break-Even Analysis

a method of determining what sales volume must be reached before total revenue equals total costs

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