- A.Continuously adjusting price based on demand, supply, time, customer, or competitor signals — common in airlines, hotels, ride-sharing.
- B.Selling multiple products together at a price below the sum of individual prices — captures revenue from customers who would not buy each item alone.
- C.Setting price based on the customer's perceived value rather than cost — captures the maximum the customer is willing to pay.
- D.Pricing techniques that exploit cognitive biases — charm pricing ($9.99), prestige pricing (round numbers for luxury), price anchoring, and reference pricing. ✓
Psychological Pricing is pricing techniques that exploit cognitive biases — charm pricing ($9.99), prestige pricing (round numbers for luxury), price anchoring, and reference pricing. 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
Customer perception of price is shaped by presentation, not just amount. Questions like this test whether you can distinguish Psychological 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.