Which pricing strategy involves setting the price of a product or service based on the maximum amount a consumer is willing to pay, thereby capturing the consumer surplus?

• A. Penetration pricing
• B. Cost-plus pricing
• C. Price discrimination
• D. Loss leader pricing

Answer: (C)

Verified step by step guidance

1. Understand the concept of consumer surplus, which is the difference between what a consumer is willing to pay for a good or service and what they actually pay.
2. Recognize that the pricing strategy that aims to capture this consumer surplus by charging different prices based on consumers' willingness to pay is called price discrimination.
3. Review the other options: Penetration pricing involves setting a low initial price to enter a market; Cost-plus pricing sets prices by adding a markup to costs; Loss leader pricing sets a low price on a product to attract customers to buy other products.
4. Identify that price discrimination involves segmenting consumers or charging different prices to different consumers to maximize revenue by capturing the maximum willingness to pay.
5. Conclude that the correct pricing strategy described is price discrimination, as it directly relates to setting prices based on consumers' maximum willingness to pay.