Question

What is nonprice competition? Why is there an emphasis on nonprice competition in oligopoly markets rather than on lowering prices to gain market share?

Answer 1

Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship"

Oligopolies might prefer non-price competition over price competition, because it is usually more profitable than selling for a lower price, and they can avoid price wars, which can happen with price competition. The main positive effects of advertising are that a firm can give its consumers a lot of details and information about their product in a quick, easy and fairly inexpensive way. Some of the negative effects are that some advertising is not very informative and doesn’t tell the consumer exactly what the product has to offer. Additionally, sometimes products will “cancel each other out,” because company A will advertise for their product and company B will advertise for their product and then nobody will see an increase in profit.