Firms compete for market share and the demand from
consumers in lots of ways. We make an important distinction between price
competition and non-price competition. Price competition can involve
discounting the price of a product to increase demand (cost-plus, predatory
and limit pricing). Non-price competition focuses on other strategies for
increasing market share (advertising and sales promotion policies, and
collusion and cartels).
cost pricing is defined as where a firm charges a price explicitly with
reference to average costs plus a percentage profit mark-up.
pricing is defined as a situation where a firm is prepared to deliberately
make a loss in the short run with the aim of driving a rival(s) out of the
market. In the long-run this will enable the firm to raise its price more
than it has previously been reduced.
pricing can be defined as a situation where an established firm tries to
forestall new entry in a situation typically where economies of scale exist.
And Sales Promotion Policies
Consider the example of the UK supermarket sector where
non-price competition has become important in the battle for sales
advertising / marketing
and other Services (including travel insurance)
chemists and post offices
petrol at hypermarkets
of opening hours (24 hour shopping)
use of technology for shoppers including self-scanning and internet
See previous notes.