Question

________ is a pricing tactic a firm uses for two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second high-margin item.

A) Two-part pricing
B) Price bundling
C) Captive pricing
D) Penetration pricing
E) Skim pricing

Answer 1

Captive pricing is the tactic where a firm sells one product at a low price and makes a profit on a second high-margin item that is necessary for the first item's use.

Step-by-step explanation:

The pricing tactic a firm uses for two products that work only when used together, where one item is sold at a very low price and the profit is made on the second high-margin item, is known as Captive pricing.

This is not to be confused with price bundling, which offers advantages for consumers by allowing them to acquire multiple products or services at a better price. Tying sales, which require customers to buy a product only if they also buy another product, can be seen as controversial and are often not advantageous to the consumer.