Slide6_2010Fall_MGMT324

2 consumers willingness to pay for entrants product

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2) Consumers’ willingness to pay for entrant’s product and all other substitute products 3) Size of the market Should be willing to pay up to M ‐∏ I to prevent entry
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Entry Deterring Strategy Product proliferation Cereal Companies (Kellogg, General Mills, Quaker Oats, Post) Makes E less than 0 Raising rival’s costs Forces entrant to incur higher fixed costs ex) Coke & Pepsi, Slotting allowances Forces entrant to incur higher variable costs ex) ToysRus vs. Warehouse clubhouses Signaling low costs : 1) Leak misinformation & 2) Limit pricing Predatory pricing Hiding profit data
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The practice of selling a product or service at a very low price (often lower that a marginal cost), intending to ward off competitors or create barriers to entry for potential new competitors Predatory Pricing What is it? Examples vs. Microsoft’s free inclusion of Internet Explorer in Windows Æ Forced Netscape to distribute its Navigator for free Airline industry Price war in the mid-90s: Coast-to-coast fares were as low as $99 In 2009, is offering fares as low as $30 for short flights & $90 for longer ones
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  • Fall '08
  • Management, Barriers to entry, Mr. Potato, Sangwoo Shin

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