When firms compete to supply homogeneous products and have similar cost structures, pure price competition drives firm profits down to zero. A firm can mitigate this outcome by

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Investing in excess production capacity to meet demand increases.

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Redesigning its product to ensure it is not a close substitute to those offered by competitors.

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Setting higher prices than competitors to ensure it sells to consumers with high willingness to pay.

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Setting lower prices than competitors to ensure it remains the cheapest supplier in the market.

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When firms compete to supply homogeneous products and have similar cost structur...

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