Markets allocate resources as they allow all consumers who are willing and able to purchase goods at a set price to receive them

Prices allow a good to be rationed – if the product is in short supply the price of the good will increase so only those willing to pay the highest prices will be allocated the resources

Incentives are any factor (financial or non-financial) that provide a motive for a course of action

Incentive pricing aims to encourage consumers to purchase a particular product increasing its demand

Prices can also be used as a signaling tool

Often high prices are seen to reflect high quality