The advice to investors provided by the newsletter states that Techcorporation is the preferred choice of investment since this new company that developed the satellite technology will enter in the market of satellite tv provider that lacks competition. Despite the argument presented in the investment advice seems logical at a first glance, it lacks the evidence that this new company will has the expertise to enter in a monopolistic market. Therefore, before deciding to follow the advice, one should consider the following questions before investing in Techcorporation.
Firstly, it is stated that the company will start providing a service in a market different from its core business. It is not because that Techcorporation has the expertise in …show more content…
Game theory, which is a branch of behavioral microeconomics, provides interesting lessons regarding interaction between competitors within a certain market. Usually, when there is a company entering in a established market, the established players tend to be more willing to reduce their price and thus their profit margins. This can be extremely challenging for a company trying to enter in the market, since it tends to face higher initial costs than those faced by already established companies. As a result, since the advice is not considering the possible reactions of the established players it could be misleading given that the price of the current service might be reduced by every player in the market what would compromise the profit margins of every player, specially, for the new comer Techcoprt.
Lastly,the advice assumes that because the current consumers of established satellite providers are unhappy that they will necessarily switch to a new table tv company. Since Techcorporation has no previous experience in providing satellite tv services, how can they be sure that the problems that happens to the established companies won't occur to Techcorporation as well. As a result, it is unclear in the advice the objective causes of this consumer's insatisfaction and that how it could be beneficial for a new player such as
Firstly, it is stated that the company will start providing a service in a market different from its core business. It is not because that Techcorporation has the expertise in …show more content…
Game theory, which is a branch of behavioral microeconomics, provides interesting lessons regarding interaction between competitors within a certain market. Usually, when there is a company entering in a established market, the established players tend to be more willing to reduce their price and thus their profit margins. This can be extremely challenging for a company trying to enter in the market, since it tends to face higher initial costs than those faced by already established companies. As a result, since the advice is not considering the possible reactions of the established players it could be misleading given that the price of the current service might be reduced by every player in the market what would compromise the profit margins of every player, specially, for the new comer Techcoprt.
Lastly,the advice assumes that because the current consumers of established satellite providers are unhappy that they will necessarily switch to a new table tv company. Since Techcorporation has no previous experience in providing satellite tv services, how can they be sure that the problems that happens to the established companies won't occur to Techcorporation as well. As a result, it is unclear in the advice the objective causes of this consumer's insatisfaction and that how it could be beneficial for a new player such as