DECA Sports and Entertainment Marketing Practice Exam

Which pricing strategy involves related businesses agreeing to maintain high prices?

1. Price skimming

2. Price fixing

3. Cost-based pricing

4. Dynamic pricing

The correct answer is: Price fixing

The pricing strategy that involves related businesses agreeing to maintain high prices is price fixing. This practice occurs when companies in an industry collude to set prices at a certain level rather than allowing market forces to determine prices independently. By setting prices collectively, these businesses aim to maximize their profits, as maintaining high prices can limit competition and minimize price wars. Price fixing is typically illegal in many jurisdictions because it undermines the principles of a free market economy, leading to less choice and higher costs for consumers. Unlike other strategies such as price skimming, which involves setting a high price initially and then lowering it over time; cost-based pricing, which determines prices based on production costs plus a markup; and dynamic pricing, which adjusts prices based on real-time supply and demand conditions, price fixing explicitly centers around collusion and the maintenance of artificially high prices among competitors.