Firms with market power may try to limit entry of rival firms in the long run by

Question

Firms with market power may try to limit entry of rival firms in the long run by setting the price of their product below the level that maximizes profit. This kind of pricing behavior

a. is OK in thoery but would not be commonly practiced in the real world because no manager will ever price either above or below the profit-maximizing level

b. represents a business practice or tactic because pricing decisions are routine decisions made by managers everyday

c. should always be implemented in order to maximize the firm's market share in both the short run and long run periods

d. represents a strategic pricing decision because the manager is making the pricing decision with the goal of altering the bahavior of rival firms to protect its profit in the long run.

Explanation / Answer

d. represents a strategic pricing decision because the manager is making the pricing decision with the goal of altering the bahavior of rival firms to protect its profit in the long run.

From Marketing Managemetn by Philip and Kotler

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