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Question
What are the conditions under which parity pricing is desirable?
Solution
Parity pricing is an appropriate strategy in the following situations:
- When it is very difficult to measure costs, parity pricing may be the logical first step in a rational pricing strategy.
- When price leadership is well established, charging according to what competitors are charging may be the only safe policy. In an oligopolistic market, charging lower than the leader may lead to price war.
- Where competition is very severe and competitive products are homogeneous.
- It may be less troublesome and less costly than an individualistic pricing strategy.
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