Final answer:
Offering brand-name merchandise at a discount is a strategy to attract more customers and increase market share. It also helps establish a good reputation and encourages repeat business, ultimately benefiting the firm and consumers with better or less costly products.
Step-by-step explanation:
The purpose of offering brand-name merchandise at a discount is to attract more customers. By lowering the price of well-known products, businesses can entice consumers who are searching for value, thereby increasing foot traffic and customer engagement. Discounts can serve as a form of marketing to help differentiate a firm in a monopolistically competitive market, where many sellers offer products that are similar but not identical.
Firms desire repeat customers and positive word-of-mouth recommendations, which serve to bolster their reputation. A good reputation can lead to consumer trust and the ability to command higher prices over time, as consumers are more confident in the quality of products from reputable retailers. Moreover, firms that successfully introduce new or improved products at competitive prices can contribute to market dynamism, benefiting both consumers through better or less expensive products and businesses via increased profitability.