Suppose there exist only four firms in a market. Each wants to maximise its market share and increase profits. An incompetent economic analyst advices one of the firms to reduce price to increase its sales. Would this be a correct measure to increase market share? What alternative ways would you suggest to the firms to increase sales?
A market with few producers can be considered to be in an oligopoly structure of market. Reducing prices in such a market would increase the firm's share only temporarily as the other would further reduce their price by a small value to acquire a greater share of market and this would continue and no one will end up having a greater share.
Following can be some alternate policies for the firms to have greater share :
1. by incurring huge advertising and selling costs
2. By enhancing their individual products in terms of quality, features, etc. and making it more consumer-friendly.
3. By opening-up new business venues (dealing in the same product) in order to cover a large geographical area and a greater consumer base. This will also help a firm to prove its superiority over its other competitor