Maintaining excess production capacity

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Reference no: EM131142310

Explain why each of the following might serve to deter entry of a competitor.

(a) Maintaining excess production capacity

(b) Promising customers that you will undercut any rival

(c) Selling your output at a price below that at which marginal revenue equals marginal cost (Hint: Assume entrants are unsure about what your marginal costs are. Why would they be deterred from entering if they believed you have low marginal costs? Why might a lower price lead them to think that you had low marginal costs?)

(d) Offering a discount to customers who sign up for long-term contracts

Reference no: EM131142310

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