Question

How oligopolist create entry barriers using Predatory Pricing and Brand Proliferation as an Entry Barrier inorder to earn profits in the long run. Explain with examples

Answer 1

Oligopolists use entry barriers like Predatory pricing and brand proliferation as entry barriers. This helps them earn profits in long run. For example and oligopolist sets the price of his good soo low almost near its cost price. Like if an OTT service provider like Netflix provides service for a very low cost, it will affect the new players as they won’t be able to sustain at this low subscription cost. Hence will either not enter the market or even if entered, without being able to sustain will leave the market. This way all profits are created on the basis of higher sales in quantity. Even a small percent of profit on high quantity sales will help Netflix earn profit in the long run.