strategy I problem set

1123 Words Nov 20th, 2013 5 Pages
Problem Set 2 – Strategy I
1. Why do price misreads (or more generally the inability to observe prices with precision) encourage firms to lower prices? [Note: assume all prices are subject to misreads.]
Misreads occur when a firm are competing with no information about competitors and assumes that competitors have taken an uncooperative pricing action when in fact they are cooperative.
This assumption makes the firm react in an uncooperative manner, lowering the price. This asymmetric information can then lead both firms use tit-for-tat pricing strategy what makes the competing firm respond to the initial reactionary firm in an uncooperative manner as well and lead a price war. A price war usually occurs when a firm believes that
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The study on entry and exit discussed in class (Dunne, Roberts and Samuelson, p. 300 of Besanko et al.) uses data from the 60s to the 80s. Do you expect average entry and exit to be changed since then? Why?
I think that it is clear that average entry and exit has changed since 60s and 80s. Nowadays we live in a technological era that is a really different reality. Entry and exits rates are becoming more and more dynamic, since the barriers and conditions to enter and exit to the market had changed. Adding also the fact that nowadays the technological progress, consumer taste and regulation are constantly changing. Today firms enter and exit in the market much more easily.
In the past there was less innovation and facility to do something different, and also the predisposition from the consumers was more inflexible to accept new and different goods in the market.

5. Discuss factors which might affect the speed of both growth and decline of an industry. [That is features of product, distribution channels, country institutions, anything you think will affect the growth and decline phase of an industry.]
Factors that can affect the growth phase of an industry are the amount of capital, that is crucial to the marketing strategies. A marketing strategy at several times is the most important aspect in this phase, it will permit to differentiate a firm 's offerings from other competitors within the industry. It is needed budget to focus in marketing campaign but also to

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