COMPETITION AND PRICING

Question 1

The nature of competitive markets
implies that the higher profits earned by
the firm will only invite competitors to
enter or re-enter the market.

Answer 1

THE ORIGIN OF PRICE WARS

Question 2

Competing firms considering a price
reduction often face a payoff matrix.

Answer 2

PRISONER’S DILEMMA

Question 3

Refers to
costs of reduction that are derived from
specialization of spreading the cost of
fixed assets over more units as the volume
of production increases.

Answer 3

ECONOMIES OF SCALE

Question 4

Derived
from the breadth of a firm’s activities,
perhaps depriving from saving the costs
of fixed assets over a wider variety of
units.

Answer 4

ECONOMIES OF SCOPE

Question 5

Deprived from experience as measured by
accumulated outputs

Answer 5

ECONOMIES OF LEARNING

Question 6

designed to communicate to competitors
that it is in their best interest to compete
on dimension other than price.

Answer 6

Price Signaling and Tit-for-Tat Pricing