Distress price

A distress price is the rate at which a product is sold as an alternative to discontinuing the product. This price is typically used when the demand for a product has fallen dramatically. This situation can arise when customer tastes have shifted or competing products have entered the market. A company may choose to employ distress pricing rather than stopping production when it can still set a price point that covers the variable cost of production, plus enough of a margin to pay for some of the entity's fixed costs. Continuing to sell with distress pricing also allows a business to avoid shutdown costs, such as paying severance to employees.

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