Firm strategy

Firm strategy

1. Pricing

   • Elasticities
     • PED
     • YED
     • XED
     • PES
   • Px taker
     • Accepting the Px mkt determines
       • e.g PC Firms
   • Price rigidity
     • ↓ Px, rivals will follow suits, but when ↑ Px, rivals will not follow suit
       • Kink DD theory
         • e.g Oligopoly
   • Px setter
     • Limit pricing
       • below the short run profit-maximising price
         • To drive out competition
           • e.g monopoly
     • Predatory pricing
       • keep price below AC
   • Profit maximisation MC = MR

2. Non-Price

   • R & D
     • i.e Real differences
     • improve the quality and the features of the good
       • ↑ price inelastic dd
         • ↑ prices
   • A&P/Branding
     • i.e Imaginary differences
     • ↑ awareness and the appeal
       • ↑ DD of the good

3. Others

   • Output strategy
     • ↑ output
     • ↓ output
       • Produce at MC = MR
   • Alt Objs
     • LT profit maximisation
       • Growth maximisation
       • Corporate image
   • Collusion
     • Formal
       • Explicit price-fixing
         • Cartels
           • Act like 1 big monopoly
     • Tacit/Informal
       • Price leadership
         • Dominant firm establishes price/price changes
   • M&A
     • Cost adv
       • IEOS
       • Remove duplication
       • ↓ Adv cost
     • Revenue adv
       • ↑ DD
       • ↑ Px Inelastic DD
       • R&D