When the Swiss Watchmaker TAG Heuer Raised the Average Price

When the Swiss watchmaker TAG Heuer raised the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. The likely cause of this volume increase is

A) because the watch market is highly conservative.
B) because economies of scale in production would be substantial.
C) because retailers are not willing to carry new brands of watches in this category.
D) because once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
E) because watches in this category have an element of prestige pricing, so that lower prices may result in lower sales.

Correct Answer:

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