The rivalry among competing firms tends to be more intense:
A) when demand for the product is growing slowly,buyers have low switching costs,and the actions of any one company to attract more customers and boost market share have strong direct impact on their rivals.
B) when the products/services of rival sellers are more strongly differentiated and buyer demand is strong and growing rapidly.
C) when rivals are relatively content with their market position.
D) when there are so many industry rivals that the impact of any one company's actions is spread thinly across all industry members.
E) the smaller the number of firms in the industry and the more unequal their market shares.

Question

Quizplus · Accepted Answer

Intense rivalry is more likely when demand is growing slowly because firms have to fight harder to attract customers, and any one company's actions to boost market share directly affect its rivals. Low switching costs also mean that customers can easily switch to a competitor, adding to the competition.

Answer: E 
 When there are fewer firms in the industry and their market shares are unequal, competition tends to be more intense because each firm has more to lose or gain from the actions of its rivals. This creates a more cut-throat environment where firms will aggressively compete to gain an advantage.

The Rivalry Among Competing Firms Tends to Be More Intense