Which pricing approach is based on competitor prices?

Which pricing approach is based on competitor prices?

• A. Based on production cost
• B. Price discrimination
• C. Basing sale price on Competition
• D. Pricing based on demand

Answer: (C)

Pricing based on competitor prices is competitive pricing: you set your price by looking at what others charge. In markets with similar offerings, firms often aim to match or slightly undercut the going price to attract customers who compare options. This approach helps maintain market share and lets you respond quickly to rivals’ moves, but it can lead to price wars if many players undercut each other. It differs from pricing based on production cost (you add a markup to costs), price discrimination (charging different prices to different groups), or pricing based on demand (pricing tied to customers’ willingness to pay and perceived value).

Pricing based on competitor prices is competitive pricing: you set your price by looking at what others charge. In markets with similar offerings, firms often aim to match or slightly undercut the going price to attract customers who compare options. This approach helps maintain market share and lets you respond quickly to rivals’ moves, but it can lead to price wars if many players undercut each other. It differs from pricing based on production cost (you add a markup to costs), price discrimination (charging different prices to different groups), or pricing based on demand (pricing tied to customers’ willingness to pay and perceived value).