Lessons Learned

• Firms have trouble profiting when they compete on price because price is very visible to consumers.

• To stop your rival from undercutting your price, your rival needs to believe that you will quickly respond to any price reduction.

• It’s almost impossible to restrict price competition among many firms that sell near identical goods.

• Internet retailers necessarily face massive competition because every other store that sells similar products is a rival.

• Complex pricing can reduce price competition by making it difficult for customers to comparison shop.