Which example best illustrates captive pricing?

• A. Printer priced low and ink priced high.
• B. Ink is included with the printer purchase.
• C. Printer prices are reduced to attract customers while ink prices are increased.
• D. Printers and ink are priced the same.

Answer: (C)

Captive pricing involves setting a low price for the main item to attract buyers, then charging higher prices for the necessary, ongoing accessories or consumables that keep the product in use. The option describing a printer priced low to attract customers while ink prices are increased shows this dynamic clearly: the inexpensive entry product brings customers in, and the high-margin consumables protect long-run profits as customers need to buy ink repeatedly to use the printer.

The other scenarios don’t reflect this ongoing, required-purchase pattern: including ink with the printer eliminates the separate, recurring high-margin sale; pricing both items the same removes the incentive to buy the consumables at higher prices; and simply stating a low-priced printer with high ink prices is essentially the same idea but the chosen wording makes the captive strategy explicit.