7.8.4—Pricing policies

A pricing policy is a rule for setting prices, such as cost-plus, penetration, price skimming, limit pricing, predatory pricing, psychological pricing or dynamic pricing.

The suitable policy depends on demand elasticity, costs, product life cycle, competition, capacity, legal constraints and the objective. A low introductory price may build volume, while a high launch price may recover R&D from customers with high willingness to pay.

A new technology with strong early demand may use skimming before competitors enter; a supermarket with a low-margin strategy may use penetration to build regular traffic.

A named policy does not predict success by itself; explain the mechanism and the condition that makes the price credible.