The more attractive the price/performance ratio of substitute products, the tighter it constrains the ability of an industry to charge high prices.

Question

Quizplus · Accepted Answer

Substitutes limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can charge profitably. The more attractive the price/performance ratio of substitute products, the tighter the lid will be on the profits of that industry.

The More Attractive the Price/performance Ratio of Substitute Products, the Tighter