ECO 3139 Lecture Notes - Lecture 7: Product Differentiation, Root Mean Square, Brand Loyalty

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Based on the notion of strategic entry deterrence which is realized when existing. Rms might deliberately in ways that decrease the . Static or structural barriers of entry: economies of scale, absolute cost advantage, capital cost requirements, product differentiation (1) economies of scale. !1 for increment qp=10$ (pi) *sub*increment (p-ac) per unit pro t for p> , (pi)*subscript* increment > 0. Maximum price the in cumbent can charge= =ac sub entrant. Wednesday, february 8, 2017 (3)capital cost requirements ($) product differentiation. Consumers view different products as substitutes because: they are different in quality, they perform differently, reputation, brand loyalty. > cost of switching from one brand to other brands is not worth it. As you increase running advertising messages, average cost of advertising declines. Methods of estimating economies of scale: statistical cost analysis, survivor studies. First who survive in the lr are cost ef cient.

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