A pricing policy used by a company for a new product which involves setting a high original price to insure large profits before competitors are able to produce similar, cheaper products.

Price skimming is sometimes referred to as ‘riding down the demand curve’. The objective of a price skimming strategy is to gain control of consumer expenditure. Done successfully, then in theory no customer will pay less for the product than the maximum they are willing to pay. In practice, it is almost impossible for a firm to capture all of this surplus capital.