Managerial Economics

Competing in Tight Oligopolies: Nonpricing Strategies

Oligopoly firms also use a number of strategies that involve measures other than pricing to compete and maintain market power. Some of these strategies try to build barriers to entry by new entrants, whereas the intention of other measures is to distinguish the firm from other existing competitors.

1. Advertising. As we noted in chapter 3, most firms incur the expense of advertising. To some extent, advertising is probably necessary because buyers, particularly household consumers, face a plethora of goods and services and realistically can actively consider only a limited subset of what is available. Advertising is a means of increasing the likelihood a firm’s product or service is among those ...