Page 80 - EBOOK DPM 10013 POM-FINAL 25.10.2021

C. Competition-Based Pricing

 Pricing is determined by competition strategies, prices, costs, and market
offerings. In order to obtain market share, competitors entering a new market may

choose to:

a) Price the product below the market price.

b) If the product has a distinct competitive edge, price it higher than the market

price.
c) Price the product at the current market price to prevent a price war and see if

non-price competition can work.

 Consumers will base their assessments of a product's worth on the prices charged

by competitors for similar goods. The ability for a firm to control the price charged
depends on the market structure of the industry. Example:

a) Monopoly market – single producer of a product will be able to charge end

price it wishes.

b) Perfect competition market – the firm would not be able to determine the
selling price. The price is determined by the quantity demanded and the

quantity product.

c) Oligopolistic market – there are a few large firms that dominates a market,
lowering price to compete might lead to a price war

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