ExpertEasy2 marksMultiple Choice
ACCA · Question 07 · Decision-making Techniques
Section A
BioGenix has developed a breakthrough, patented gene-therapy drug that cures a rare disease. There are currently no competitors, but the patent expires in 5 years. Research and development costs were extremely high.
Which pricing strategy is most appropriate for BioGenix at the launch of this drug?
Section A
BioGenix has developed a breakthrough, patented gene-therapy drug that cures a rare disease. There are currently no competitors, but the patent expires in 5 years. Research and development costs were extremely high.
Which pricing strategy is most appropriate for BioGenix at the launch of this drug?
Answer options:
A.
Penetration pricing
B.
Price skimming
C.
Marginal cost pricing
D.
Loss leader pricing
How to approach this question
Identify the market conditions: high R&D, monopoly (patented), short lifecycle before competition. Match these to the strategy that maximizes early revenue.
Full Answer
B.Price skimming✓ Correct
Price skimming involves setting a high initial price for a new, highly differentiated product (like a patented drug). It allows the firm to 'skim' the maximum willingness to pay from the market to recover high R&D costs before the patent expires and competitors enter.
Common mistakes
Choosing penetration pricing, which is meant for highly elastic, competitive markets to build volume.
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