Question

Which of the following is an example of strategic entry deterrence?

Answer 1

Answer:

E. both a and b

Explanation:

Strategic entry deterrence refers to any act that prevents potential market participants from competing in a particular market. Such actions or barriers to entry may include rival capture, product differentiation for extensive product development, capacity building to lower unit costs, and predatory pricing. While many entry barriers can be created, time can also be a barrier to entry because potential marketers are less likely to enter the market if it takes longer to complete the task. they spend and lose their profits over time. Entrance barriers are sometimes considered anti-competitive and may be subject to different competition laws.

One way to block access to the new entrants is to produce products at a lower price than the monopoly level. This not only reduces profitability, but also makes them less attractive to participants, but also means that the current person is more likely to meet market demand and to leave any potential bidder in the market.

The current company has the advantage of being the first carrier, so it can act in a way that it knows will affect the decision of the participant. Assuming incomplete data (ie, the costs of the current firm are known only) can only make assumptions about the cost structure of the participant with price and output levels. Therefore, duty people can use them as a signal to any potential bidder.

An officer trying to strategically hinder access may do so by trying to minimize market entry. Expected revenues depend heavily on the number of customers waiting for the participant - so one way to prevent access is the "shutting-down" consumer.