The Student Room Group

Non-Price Discrimination

If an Oligopoly participates in non-price competition could it be argued that heavy spending on advertising is a misallocation of resources as it exploits consumers' irrational and biased motives? Could this be a source of criticism for an Oligopoly that is considered to be competitive and how could a government legislate for such a market failure may be through tax relief on capital investment or something else?
Reply 1
within an oligopoly little is done to increase market share but sales growth, the idea is that they stop caring about market share as they cant gain anymore and instead care about differentiation and innovation for increased revenue or enter new markets,

the competition and high regulation means they will have to have consumer wants within their focal vision over profitability, very good for consumers as they have good choice and good prices - less will be spent on marketing and more on R&D

because if you think about it anything they do competitors will follow, like wise with said firm to their competitors - in pricing, for example if a bank lowers the price on a current add on packaged accounts then all competitors must match this price to retain the market share or face customers switching

Oligopolies are highly regulated to ensure that they dont become monopiles and price too high to exploit customers in the first place to prevent market failure

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