How does price skimming work over time as a pricing strategy?

Answer by  LucasBridge (12)

Price skimming means a company can ofset their initial costs, and gain a profit advantage, by charging a higher price to a market's early adopters before the market reaches maturity and competition forces lower prices. It only works as a pricing strategy for large companies entering a new product into a market where there is potential for mass early adoption.

Answer by  idol (36)

Price skimming is often the result of reduced costs in manufacturing. Often when a new product is released, such as when dvd players were first sold, the cost of parts and technology to manufacture them was very high. Later as these costs are reduced the pricing is reduced to compensate

Answer by  idiotjones (705)

Price skimming is essentially following the demand curve. The price is artificially inflated at first, and iteratively lowered. As the price goes down, the demand increases. The intent is to capture as much of the buyer market as possible prior to competition lowering the price.