- A.Launching at a deliberately low price to capture share quickly, then raising once the market is established.
- B.Setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices.
- C.Three primary approaches to setting price — cost-based, value-based, and competition-based — each appropriate to different market conditions.
- D.Continuously adjusting price based on demand, supply, time, customer, or competitor signals — common in airlines, hotels, ride-sharing. ✓
Dynamic Pricing is continuously adjusting price based on demand, supply, time, customer, or competitor signals — common in airlines, hotels, ride-sharing. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Captures willingness-to-pay across customers and times. Questions like this test whether you can distinguish Dynamic Pricing from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.