Competition-Based Pricing

The price strategy that you choose for your products based on competition in that area, for example:

You can make your prices higher than the competition to give the impression of higher quality.
For example, Apple provides high-tech gagets but they are also quite expensive and are exected to last, however because of the high quality people are still prepared to pay for it.

or you can lower the price so that cumstomers think that they are getting a 'bargin'.
For example, 99p stores and Poundland sell products of a decent quality at low prices which in turn can also persuade people to shop there because of the prospect of getting a 'bargin'

An important thing to look out for is price sensitivity, this is a situation where if you change the price even by a little bit you are at risk of loosing customers.
For example, if a candle was sold in poundland but they increased the price to £3.00, then customers would be more likely to go elsewhere to look for a better value candle.

Some companies choose to go head-to-head with their competitors by lowering their prices to meet, or beat that of competitors.

Perfect competition is where there is an extreme level of competition. (This exists in theory rather than in practice) another extreme is Monopoly, where a single firm dominates a market.

Imperfect Markets, there may be few or many sellers. Products are usually differentiated and comsumers do not have perfect inormation aout the differences between products.

At the ed of the day you can't make a customer pay more than they are prepared to.