Final answer:
The type of pricing where a firm sells a product or service at multiple prices that don't reflect cost differences is known as segmented pricing. This approach targets different consumer segments to maximize revenue and should not be confused with predatory pricing, which aims to eliminate competition.
Step-by-step explanation:
The type of pricing a firm uses when it sells a product or service at two or more prices, where the difference in price is not based on differences in cost, is known as segmented pricing. This is distinct from cost-plus pricing, which involves adding a standard markup to the cost of the product. Segmented pricing can include various forms, such as student discounts, senior citizen rates, or premium pricing for different seating at an event. It allows firms to capture more consumer surplus and can often be seen in bundled products, such as those offered by cable companies, where products like cable, internet, and a phone line are sold together at a special bundled price.
A firm might use segmented pricing to target different groups of consumers who are willing to pay different prices for essentially the same product or service. This strategy looks to maximize revenues by capturing the differences in the willingness to pay among different customer segments. It is important to note that this is a legal practice and not to be confused with predatory pricing, where a firm sets prices below average variable cost with the intent to drive competitors out of the market.