Marginal-cost pricing is an example of which type of pricing method?

Marginal-cost pricing involves setting the price of a product based on the additional cost of producing one more unit. This pricing strategy aims to cover the variable costs associated with production while contributing to fixed costs and overall profitability. By focusing on the marginal cost, businesses can ensure that they are pricing their products in a way that can effectively stimulate demand without necessarily considering the full average cost structure of the product.

Choosing to use marginal-cost pricing aligns with the principle of contribution to overhead pricing, which emphasizes covering variable costs first and then contributing to fixed costs or overhead. This approach can be particularly useful in competitive markets or when trying to increase market share, as it allows firms to price products more attractively while still contributing to their fixed costs over the long term.

Value-based pricing, penetration pricing, and skimming pricing focus on different strategies that do not specifically prioritize marginal costs in the same way. Value-based pricing centers around perceived value to the customer rather than the costs incurred; penetration pricing aims to enter a market quickly with low prices to gain market share; and skimming pricing involves setting high initial prices then lowering them over time. Each of these strategies addresses different market dynamics and objectives, but they do not directly correspond with the marginal-cost approach.