The practice of a company offering a new product and charging a high
price at first, but gradually reducing it before competitors begin to
sell similar products. For example, a company may offer a new product at $40 per unit, then in six months reduce the price to $35, to $30 in another six months, and so forth. Price skimming allows the company to recover its
sunk costs (such as
research and development) while still remaining competitive when other companies begin to offer substantially the same product. It is also called a high price strategy.