Price skimming is a strategy where a company charges a higher price due to:

Introduction:
Price skimming is a pricing strategy where a company sets an initially high price for a product or service and then gradually lowers it over time. This strategy is often used by companies when they have a sustainable competitive advantage.

Explanation:

A sustainable competitive advantage:
- One of the main reasons why a company may choose to implement price skimming is because they possess a sustainable competitive advantage.
- This advantage could be in the form of a unique product or service, innovative technology, strong brand recognition, or exclusive distribution channels.
- By charging a higher price initially, the company can capitalize on its competitive advantage and maximize profits in the early stages of the product lifecycle.

Maximizing profitability:
- Price skimming allows a company to maximize its profitability by targeting customers who are willing to pay a higher price for a new and innovative product.
- These customers are often early adopters who are willing to pay a premium for the latest technology or features.
- By setting a high initial price, the company can capture a significant portion of the market's willingness to pay and generate higher profit margins.

Market segmentation:
- Another reason why a company may implement price skimming is to segment the market and target different customer segments.
- By initially charging a higher price, the company can attract customers who value the product's unique features or benefits and are willing to pay a premium for them.
- As the price is gradually lowered over time, the company can attract a broader customer base who may be more price-sensitive.

Conclusion:
- Price skimming is a pricing strategy that allows a company to capitalize on its sustainable competitive advantage and maximize profitability.
- By setting a higher price initially, the company can target early adopters and customers who value the product's unique features.
- As the price is gradually lowered, the company can attract a broader customer base and increase market penetration.