Multipoint competition arises when two or more enterprises encounter e

QUESTION

Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

Indicate whether the statement is true or false.

ANSWER

TRUE
Knickerbocker’s theory can be extended to embrace the concept of multipoint competition. Multipoint competition arises when two or more enterprises encounter each other in different regional markets, national markets, or industries. Economic theory suggests that rather like chess players jockeying for advantage, firms will try to match each other’s moves in different markets to try to hold each other in check. The idea is to ensure that a rival does not gain a commanding position in one market and then use the profits generated there to subsidize competitive attacks in other markets.