For the success of the penetration price policy, which one of the following is not desirable ?
Penetration pricing involves setting a low initial price to capture a large market share quickly, which succeeds when price elasticity of demand is high, significant…
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For the success of the penetration price policy, which one of the following is not desirable ?
Answer and explanation
Correct answer C
Penetration pricing involves setting a low initial price to capture a large market share quickly, which succeeds when price elasticity of demand is high, significant economies of scale exist, and cross-elasticity of demand is high so buyers switch from competitors. A very low cross-elasticity of demand indicates no close substitutes and favours price skimming rather than penetration pricing.
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UGC NET Commerce