Question

List and explain the four main pricing practices where ethical problems are likely to arise

Answer 1

The four major pricing practices where ethical problems are likely to arise are as follows:

1) Predatory pricing - Under this practice, the goods & services are priced extremely low to drive competitors out of the market.

2) Collusive (horizontal) price fixation - It involves an agreement between a group of people on the sell side of a market to sell a good or service at a fixed price.

3) Bid rigging - It involves promising a commercial contract to one group, even though the bidder makes it look like multiple parties had the opportunity to submit a bid. This practice hurts consumers considerably because the best producer doesn’t receive the work necessarily.

4) Price discrimination - Price discrimination is the strategy of selling the same product at different prices to different groups of consumers, usually based on the maximum they are willing to pay. The practice also surfaces in hiding lower priced items from customers who have a higher willingness to pay.