Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.

Question

Quizplus · Accepted Answer

Incumbents with deeper pockets than new entrants are able to withstand price competition for a longer time and wait for the new entrants to exit the industry-then raise prices again. Other weapons of retaliation include increased product and service innovation, advertising, sales promotions, and litigation.

Federal and Regional Laws Prevent Incumbent Firms from Dramatically Lowering