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Going rate pricing


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Going rate pricing

Going rate pricing is a pricing strategy where firms examine the prices of their competitors and then set their own prices broadly in line with these.

Going rate pricing is most likely to occur where:

  • there is a degree of price leadership taking place within a particular market
  • businesses are reluctant to set significantly different prices because of the risk of setting off a price war, which would reduce profits to all firms
  • there is a degree of collusion taking place between firms

If there is one price leader and firms are tending to follow the prices set by the price leader, then they will often feel frustrated that they are not able to mark themselves out by reducing their prices. To compensate for this, they may try, through their marketing strategy, to establish a strong brand identity. This will enable them to differentiate themselves from the competition.