Question

For jointly owned substitute products, cannibalization leads to MR______MC.

Higher than

Lower than

Equals

None of the above

Answer 1

For jointly owned susbtitute products, cannibalisation leads to MR lesser than MC

Prices of a product goes down when a new product is introduced by the same producer which is called as cannibalisation. When the producer introduces product in the market, he faces difficulty in deciding the prices for his products. In general, marginal revenue for each products goes down in jointly owned substitute products as the higher revenue for one product comes at the expense of other product. With a single product, the producer can price it at MR=MC, but the case changes completely with a substitute product and it leads to MR lower than MC.