A low-cost price leader could enforce its leadership through implied threats to a rival by increasing production at a lower operating co
A low-cost price leader could enforce its leadership through implied threats to a rival by increasing production at a lower operating cost. Let's say a manufacturer can increase it's output by 40% while only increasing operating costs by 10%. The low-cost price leader could then say they have the ability to over saturate the market with their product while still keeping a lower price. This would be most effective in a oligopoly, where the competition is limited and the market is shared. An example of an oligopoly would be your local cable companies, where in this example one company could build up infrastructure to support a larger area allowing them to bring in more customers. If the company can bring in more customers while keeping operating costs roughly the same, they can keep the price low and take over the market. Using the knowledge of being able to expand while keeping prices low, that cable company can prevent other companies from lowering prices in competitive areas with vague threats of expansion with superior service and lowers costs.
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.