The professor in the lecture illustrated two strategies used by companies to determine their initial product price.
The first one is to set the initial price high, and followed by a lower price in later stage. This is applicable in innovative high-tech products which want to establish a high quality image at the beginning. For example, the video recorder and cell phones, customers are willing to pay more to get them sooner.
The second strategy is to set the initial price low which is applicable for some new companies who want to enter an already saturated market, like a computer market. In order to gain market share, the new brand would undercut its competitors by setting a lower price to attract customers who weren’t interested in buying computer or want to switch a brand. To make profit, they will encourage customers to buy their accessories products like printers or software.