In preparation for introducing a new doll to the market, a toy company advertises and creates so much demand that little girls are lined up at the stores, determined to be the first to own one. The toy company sells these first dolls at twice their actual retail value. This is an example of ______.

• A. Price skimming
• B. Predatory pricing
• C. Psychological pricing
• D. Penetration pricing

Answer: (A)

Price skimming involves introducing a new product at a high price to capture the willingness-to-pay of early adopters before gradually lowering the price to attract more price-sensitive customers. The scenario describes a toy company creating strong demand and selling the first dolls at twice their actual retail value, targeting those eager to own the product immediately and willing to pay a premium. This approach fits price skimming because the initial price is intentionally high to maximize margins on newness and scarcity, with the possibility of price reductions later as demand evolves. Predatory pricing would mean pricing below cost to push competitors out, which isn’t happening here. Psychological pricing relies on how a price feels to consumers (like $19.99), not simply charging a higher amount. Penetration pricing starts with a low price to gain market share, which is the opposite of this strategy.