What pricing strategy bases the price on the price set by competitors?

Competition-based pricing is a strategy where a business determines its product's price primarily by referencing the prices set by its competitors. This approach is particularly effective in markets where products are relatively homogeneous, allowing consumers to easily compare prices.

By using competitors' pricing as a benchmark, businesses can position their products more strategically, either by setting prices slightly lower to attract customers or aligning closely with the competition to avoid price wars. This strategy reflects a market-oriented approach and helps businesses remain competitive without necessarily focusing heavily on their own costs or demand elasticity.

Cost-plus pricing, on the other hand, calculates the price by adding a markup to the cost of production, which does not consider competitors' prices directly. Market skimming involves setting higher prices initially to maximize profits from early adopters, and while penetration pricing aims to gain market share by setting lower prices to attract customers, neither of these strategies uses competitors' pricing as a primary factor in setting prices. Thus, competition-based pricing most accurately describes a pricing strategy focused on what others in the market are charging.