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Suppose there exist only four in a marke...

Suppose there exist only four in a market. Each wants to miximise its market shar and increase profits. An incompetent economic analyst advices one of the firms to reduce price to increase its sales. Would this be a correct measure to increase market share ? What alternative ways would you suggest to the firm to increase sales ?

Text Solution

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Since the market from under consideration is oligopoly, a reduction in price by one firm may lead to price war which would make all firms worse off.
Sales can be increased by non price competition through advertising, discounts, free gifts etc.
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