Question
Tony is a maker of high-end electric sports cars. He initially set his vehicle prices at $70,000 per unit. When he received criticism about the pricing of the cars, he reduced the cost to $50,000 per unit. Strangely, Tony found that when he reduced the price, the sales of the cars declined. Tony then raised the price back to its previous level, and sales returned to the same rate as before. What pricing approach best describes what Tony engaged in in this scenario?
(1 point)
Responses
penetration pricing
penetration pricing
price fixing
price fixing
value-based pricing
value-based pricing
prestige pricing
(1 point)
Responses
penetration pricing
penetration pricing
price fixing
price fixing
value-based pricing
value-based pricing
prestige pricing
Answers
GPT-4o mini
The pricing approach that best describes what Tony engaged in in this scenario is **prestige pricing**.
Prestige pricing involves setting prices higher to signal that the product is of higher quality or is more desirable, which seems to have been the case with the high-end electric sports cars. When Tony initially reduced the price, it did not align with the luxury and exclusivity associated with his brand, resulting in a decline in sales. When he returned to the higher price, the sales returned to their previous level, indicating that customers perceived more value at the original price point.
Prestige pricing involves setting prices higher to signal that the product is of higher quality or is more desirable, which seems to have been the case with the high-end electric sports cars. When Tony initially reduced the price, it did not align with the luxury and exclusivity associated with his brand, resulting in a decline in sales. When he returned to the higher price, the sales returned to their previous level, indicating that customers perceived more value at the original price point.