Successful differentiation enables firms to set prices at the industry average and gain market share.

Question

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Successful differentiation allows firms to offer unique and valuable products or services, thus reducing their dependence on price as a competitive factor. This, in turn, enables them to charge prices at or slightly above the industry average and still attract customers who are willing to pay more for the added value. By doing so, these firms may also gain a larger share of the market as customers perceive their products as more attractive and worth the extra cost.

Successful Differentiation Enables Firms to Set Prices at the Industry