Price skimming is a pricing policy by which a corporation sets a comparatively towering primary price for a product or service at first, and then lessens the price over time (Spann, Fischer, & Tellis, 2015). It is a temporal description of price discrimination as it permits the corporation to recover its downcast costs rapidly before competition intervenes and lessen the market price. With price skimming, when a product gets released, it gets accessible at lofty price and then lowered soon after the life series of the product or when competition starts to get in the market. The purpose of a price skimming policy is to capture the customer surplus untimely in the product life series sequentially to take advantage of a monopolistic situation or the low price compassion of modernizers (Spann, Fischer, & Tellis, 2015). Therefore, price skimming is mostly utilized in technology products like electronics. For instance, in consumer electronics, if a printer gets manufactured today, it gets priced at high price but with time due to competition it get priced at a low price.
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Price skimming gets applied into different conditions in a corporation. One, it can get applied where the corporation wishes to skim the best on a new product before competitors gets into the market. When a firm introduces a new product it may be able to charge elevating prices as some consumers would desire to be first to purchase the product. Secondly, price skimming is desirable when primary cost of fabrication is extremely elevated which has to get recovered as untimely as probable.
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