Question

1. How does first-mover advantage lead into a sustainable competitive advantage?

2. Where does the Austrian Trade Cycle Theory fit into first-mover advantage?

3. How does efficiency impact collusion?

Answer 1

1) The first mover advantage helps in to influence the customers before other competitors enter that particular market. The strong brand recognition that is established by the company due to its first existence is difficult to over come. It therefore somewhat helps the company to establish its self as a benchmark in the industry or the market. This further helps them to have a sustainable competitive advantage because of the brand loyalty and higher market reach.

2) The Austrian Trade cycle theory believes that there is boom in the industry due to changes in the interest rate lower than the natural level, also when the production system is distorted. It believes that production opportunities should be introduced in new areas, because one cannot consume if something is not produced. Hence when a company enters for the first time with a product that was never present in the market, it is bound to boom in the industry.

3) When firms collude in an oligopoly they start acting like a "monopoly" where there is less quantity produced but the price of those products are extremely high in order to maximize profits. Efficiency is lost along greater margin when it is under a collusion than it does when it is under competition.