Answer :
Final answer:
The correct answer is c. Skimming pricing. A common pricing strategy used by firms is skimming pricing, which involves setting high initial prices that decrease over time. Other strategies include penetration pricing and two-part pricing, which involve a mix of fixed and variable charges to maximize consumer surplus.
Explanation:
The correct answer is c. Skimming pricing. A common pricing strategy used by companies is skimming pricing. This strategy involves setting a high price initially and then gradually lowering the price over time. It is commonly used for new products that are innovative or have little competition. The idea is to maximize profits from early adopters who are less price-sensitive before the market becomes more saturated and competitive pressures force prices down. Firms also engage in various forms of price discrimination to tailor prices to different consumer segments or purchase volumes.
Pricing strategies like penetration pricing and two-part pricing are also prevalent. Penetration pricing involves setting a low price at the beginning to attract customers and build market share before raising prices. Two-part pricing, on the other hand, involves a fixed charge plus a variable charge based on consumption. This can capture more consumer surplus and is often used by utility companies. In addition, there's also indirect price discrimination, where companies offer a set of prices and let customers choose their preferred option.