Question

How does penetration pricing discourage rival companies from entering the market? (Select all that apply.) Multiple select question. It encourages price skimming, which is too risky for most companies to engage in. It negates the experience curve effect, which usually helps competitors. Competitors who enter the market will temporarily face higher unit costs. Usually none of the companies make much profit in this situation.

Answer 1

Competitors who enter the market will temporarily face higher unit costs.

2. Usually none of the companies would make much profit in this situation.

Step-by-step explanation:

Penetration pricing is a pricing strategy where the sellers of a new product set the price for their product unusually low. This is to entice consumers to purchase the product

Advantages of penetration pricing

1. it increases market share of the firm conducting the penetration pricing
2. it increases the sales of the firm practicing the penetration pricing

Disadvantages of penetration pricing

1. Profit earned by the company might be too low
2. once a low price has been set for the good, it might be difficult to raise it later as it may drive consumers away.

Price skimming is when the price of a new product is set usually high