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From course:

Industrial Organisation 2022

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Question:

How can advertising be an entry barrier?

Author: Hjalmer Pedersen



Answer:

Raising entrants’ initial costs: - High advertising expenditures necessary to draw attention to entrants product - Increase the sunk costs of potential competing interest Building reputations effects: - Existing companies may have created brand loyalty, influence consumer tastes by using advertising Economies of scale in advertising: - Cumulative effect of many commercials rounds - Increases sunk costs for potential competitors - Promotional price per minute / cm less


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Raising entrants’ initial costs:
-	High advertising expenditures necessary to draw attention to entrants product 
-	Increase the sunk costs of potential competing interest

Building reputations effects:
-	Existing companies may have created brand loyalty, influence consumer tastes by using advertising

Economies of scale in advertising:
-	Cumulative effect of many commercials rounds - Increases sunk costs for potential competitors 
-	Promotional price per minute / cm less
1 answer(s) in total