Question

A company can gain a substantial market share advantage with lower prices in a price sensitive market. Why then would any company in such a market choose to price cooperatively?

Answer 1

A company can gain a substantial market share advantage with lower prices in a price sensitive market. Thus, any company in such a market chooses to price cooperatively to take advantage of the price discrimination towards experimentation, creativity and innovation. And quite obvious reason for this could to make new competitors to remain out of the market. Other factors could be, such as, the experienced customers are more price sensitive with respect to the substitute available in the market; customers are more sensitive towards the unique value offered by the product price; how does the impact happen on the customer with respect to the switching cost of the product or vendor; customers generally face difficulty in comparing the available alternatives for the known product or service; to offer better quality with the cooperative pricing range; etc. Hence, some of these factors help a company to maintain its considerable profits by maintaining the lower prices.