Final answer:
Highly trusted brands are less susceptible to price-based competition due to consumer's assumptions that price indicates quality and the brand's strong reputation which assures product quality, leading to customer loyalty.
Step-by-step explanation:
Brands that are highly trusted by consumers are generally less susceptible to price-based competition compared to less established brands. Consumers with imperfect information about a product's quality tend to rely on price as a signal of quality, assuming higher prices indicate better quality. Additionally, when a brand has built a strong reputation over the years, customers are willing to pay premium prices since the reputation itself assures them of quality. Established brands leverage their reputable status to retain a competitive edge through customer loyalty and perceived quality, thus diminishing the impact of competitors who compete mostly on price.
Considering factors like market power, product differentiation, barriers to entry, and the basis of competition such as price, advertising, or other product differences are essential when assessing a firm's susceptibility to price-based competition. Well-respected brands that have invested in ensuring customer satisfaction and generating repeat business often find that they can maintain higher prices compared to new entrants or brands with lesser reputation.