DEFINITION of 'Versioning'

A business practice in which a company produces different models of the same product, and then charges different prices for each model. Versioning a product gives the consumer the option of purchasing a higher valued model for more money or a lower valued model for less money. In this way, the business is attempting to attract higher prices based on the value a customer perceives.

Also known as "quality discrimination".

BREAKING DOWN 'Versioning'

This is usually done when a product has large fixed costs of production and small variable costs. For example, in software packages, features are added or taken away to give different versions and price points. Having different options will accommodate different utilities of the consumers. It is based on the willingness to pay of the customer; a higher willingness to pay will result in the purchase of the higher quality product, and a lower willingness to pay will result in the purchase of the lower quality product.

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