Reference no: EM132428832

Pricing and Competition: Nicholas Andrae

How would a low-cost price leader enforce its leadership through implied threats to a rival?

A low-cost price leader can enforce its leadership from rivals by price matching. If its competitor has and item that is $2.30 simply just lower it about five cents.I wouldn't say 5 cent exactly, but just enough to where the company isn't losing any money. Yes it is not much but well over time and quantity that 5 cents adds up.

How does a firm become a "low cost" price leader?

A firm becomes and low cost leader by cutting unnecessary cost company wide. For instance say that you order through UPS and get you item delivered for $200, by finding a loop hole or using another company you can lower the operation cost allowing you to sell the item cheaper or more expensive.

Discuss the specific type of market structure where such companies are typically found.

One company that I thought of right of the bat was Walmart. Their probably the biggest low cost company in the US. Walmart's food products are the cheapest I have ever seem in my life time. Walmart takes their products and marks them about a dollar or two cheaper then other companies. Last time I went into 7-11 i wanted to buy and bang energy drink and it was about three dollars, but when I went into Walmart it was only two dollars. In that situation I would much prefer to buy from low-cost companies.