Which of the following is true about Red Bull's price in relation to its promotional efforts?

• A. Red Bull consistently lowers its price during promotions to match competitors.
• B. Red Bull often maintains a higher price despite promotional efforts to signal premium quality.
• C. Red Bull's promotional efforts always result in a permanent decrease in price.
• D. Red Bull rarely uses promotional efforts and relies solely on low pricing.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of price signaling in microeconomics, where a firm may maintain a higher price to convey a perception of higher quality or premium status to consumers.
2. Step 2: Recognize that promotional efforts can take various forms, such as advertising, discounts, or special offers, but do not necessarily imply a permanent price reduction.
3. Step 3: Analyze the behavior of premium brands like Red Bull, which often use promotions to increase brand awareness or sales volume without lowering the base price permanently.
4. Step 4: Compare the options given and identify that maintaining a higher price during promotions aligns with the strategy of signaling premium quality rather than competing solely on price.
5. Step 5: Conclude that the statement 'Red Bull often maintains a higher price despite promotional efforts to signal premium quality' is consistent with microeconomic principles of price signaling and brand positioning.