In markets that are characterized by products that are highly homogeneous, how should a firm react to a competitor's reduction in price?
A) shrink the amount of the product available
B) substitute expensive materials or ingredients
C) reduce product features
D) reduce product services
E) augment the product

Question

Quizplus · Accepted Answer

In markets with highly homogeneous products, differentiation is difficult, and price becomes a significant factor in consumer decision-making. When a competitor reduces prices, a firm should respond by augmenting the product, adding more value or features to differentiate itself from the competitor without reducing price. This strategy can help a firm maintain or increase market share while avoiding a race to the bottom in terms of pricing.

In Markets That Are Characterized by Products That Are Highly