Chapter 19: Pricing Concepts

Market Structure

The classification of the market based on the number of firms competing and the nature of competition; includes pure monopoly, oligopoly, monopolistic competition, and pure competition.

Oligopoly

A market structure characterized by a small number of firms that dominate the market.

Price Skimming

A pricing strategy where a high price for a new product is set initially and lowered over time, targeting less price-sensitive consumers.

Penetration Pricing

A pricing strategy where a low initial price is set to attract customers and gain market share quickly.

Quantity Discount

A type of discount given when customers purchase a certain amount of a product, such as 'buy two, get one half off'.

Cash Discount

A discount typically used for business transactions to encourage quick payment.

Seasonal Discount

Discounts offered during off-peak seasons to increase sales.

Rebate

A discount given after the purchase has been made, serving as an incentive to boost sales and customer loyalty.

Geographic Pricing

Pricing strategy that varies based on the buyer’s location, including FOB pricing.

Loss Leader Pricing

A strategy where a product is sold at a loss to attract customers.

Price Fixing

An illegal practice where competitors collaborate to set prices and avoid price competition.

Price Discrimination

Charging different prices to different buyers within a short time frame, which is not illegal if justified.

Predatory Pricing

An illegal practice of lowering prices to drive competitors out of the market.

Psychological Pricing

Setting prices based on how consumers perceive value rather than on costs.

Two Part Pricing

A pricing model where customers pay an initial entry fee and an additional fee based on usage.

Price Bundling

Selling multiple items together at a discounted price instead of individually.

Versioning

Offering different versions of a product at varying prices.