Which term describes the model in which manufacturers charge the highest initial price that customers will pay and lower it over time as new competitors enter the market?

• A. A long-term agreement in which a dealer or manufacturer loans goods to a retailer.
• B. Price-Skimming Model
• C. A set of policies and processes that enable an organization to reduce environmental impacts and increase operating efficiency.
• D. A discounted price for buying an entire parcel or a substantial part of it.

Answer: (B)

This is price-skimming. It’s a pricing approach where the manufacturer sets the initial price at the highest level customers are willing to pay, then lowers it over time as more competitors enter the market and broader segments become price-sensitive. The idea is to capture the highest margins from early adopters who value being first or who perceive unique benefits, and to recover costs such as research, development, and marketing quickly. As competition grows and demand from those willing to pay premium wanes, the price is reduced to attract the larger, more price-conscious market.

Other descriptions describe lending goods to a retailer, environmental or efficiency programs, or bulk discounts, none of which describe the strategy of starting high and trimming prices as the market evolves.