Explanation:

Also known as ‘premium pricing’, image pricing is a widely practiced marketing strategy where in the prices are set higher because it’s believed that a premium price would also increase consumer desire. Customers are often willing to pay higher prices for branded items because of the image associated with them. They would not investigate if the price accurately reflects the value.

Premium pricing leverages the psychological marketing advantage by influencing consumers and convincing them that the product carries more value than the lower priced competitor products. Consumers would pay more for the same shoes if they had Nike or Adidas written over them. Image pricing is seen more often in products with high ‘observability’ like accessories, clothing, cars etc. and is not possible with commodity products. It is also possible to charge a premium when there’s information asymmetry and consumers have no reference point for judging the value of a product.