Final answer:
A firm can use a 'push' strategy for intermediary cooperation, or a 'pull' strategy to create consumer interest. Differentiation and quality enhancements, alongside advertising, boost demand. Collusion among oligopolies can also affect market dynamics.
Step-by-step explanation:
In terms of promotional strategies within a channel, a firm can use a push strategy to encourage cooperation of intermediaries, or a pull strategy to encourage interest among consumers. Monopolistically competitive firms like those in our Main Street example can increase demand for their products by differentiating them or improving product quality, in addition to advertising efforts.
For instance, Firm A and Firm B may seek out brand differentiation and quality enhancements to stand out. Creating a unique brand identity or offering superior customer service can draw in customers without solely relying on advertising. In a situation with firms acting like oligopolies, such as colluding or forming cartels, they work together to manage output and prices to maximize their profits. In the realm of advertising, producing ads that make consumers perceive a product as distinct can increase demand by making the demand curve more inelastic or by shifting it to the right, allowing for higher prices or greater sales volume, or both.