Final answer:
Kodak is practicing captive-product pricing by having low prices for cameras and high prices for the necessary film. This pricing strategy locks in customers who must purchase high-priced complementary products, ensuring ongoing revenue for the company.
Step-by-step explanation:
The practice Kodak is employing by setting low camera prices and high film prices is called captive-product pricing. This strategy involves pricing the main product at a relatively low price and charging higher prices for the supplies or accessories that are essential for the product's operation. It is a common pricing technique used to increase profitability, where customers are drawn in by the lower price of the main item but then continue to generate revenue for the company through the purchase of the high-priced complementary products.
Contrary to predatory pricing, which is used to deter new entrants into the market by temporarily reducing prices, captive-product pricing seeks to lock in customers and ensure a steady stream of revenue through the sale of necessary accessories or supplies. This strategy is often used in cases where a company has a trademark on a popular product, allowing them to exclusively set the price for the captive products or services.