Assertion A Companies unveiling a new technology favour setting high prices Reason R They do so to s...........

Principles of Marketing Management Pricing Decisions

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Assertion (A): Companies unveiling a new technology favour setting high prices.

Reason (R): They do so to stall the entry of competitors into the market.

Both (A) and (R) are incorrect

Both (A) and (R) are correct

(A) is correct and (R) is incorrect

(A) is incorrect and (R) is correct

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Explanation:

Companies unveiling a new technology favor setting high prices to maximize market skimming. For example, Sony has been a frequent practitioner of market skimming pricing, in which prices start high at first and then slowly drop over time.
Some companies want to maximize their market share. They believe a highersales volume will lead to lower unit costs and higher long-run profit, so they set thelowest price, assuming the market price is sensitive. Texas Instruments famouslypracticed this market-peetration pricing for years. The company would build a largeplant, set its price as low as possible, win a large market share, experiencce fallingcosts, and cut its price further as costs fell.The following conditions favor adopting a market-penetration strategy:

(1) The market is highly price sensitive and a low price stimulates marketgrowth.

(2) Production and distribution costs fall with accumulated productionexperience

(3) A low price discourages actual and potential competition.