Question: In some industries prices are set low subsidies are provided

In some industries prices are set low, subsidies are provided, and other price-reducing mechanisms are used to establish a long-term relationship with the buyer. Utilities, for example, sometimes use incentives to encourage contractors to install electric- or gas-powered appliances. Manufacturers may price equipment low, then depend on service and parts for profit contribution. What are the advantages and limitations of this pricing strategy?

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  • CreatedJuly 30, 2015
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