Economics Oligopoly Questions
Price skimming is a strategy in oligopoly where a firm sets a high initial price for its product or service and gradually lowers it over time. This strategy is typically used by firms that have a unique or innovative product, allowing them to charge a premium price to early adopters or customers with a higher willingness to pay. As competition increases and more firms enter the market, the firm gradually reduces the price to attract a larger customer base. Price skimming helps the firm maximize its profits by capturing the highest possible revenue from different segments of the market at different price points.