Two Soft Drinks Sit Side-By-Side in a Grocery Store: a Six-Pack

question 299

Multiple Choice

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

• A) no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola.
• B) some consumers must perceive that Coca-Cola is a higher quality product.
• C) Coca-Cola has no incentive to maintain the quality of its product just because of the Coca-Cola brand name.
• D) None of the above is correct.

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Definitions:

Accommodate

To make a suitable adjustment or provide space and facilities for something or someone.

Sequential Labor Negotiation Game

A strategic model in economics where labor negotiations occur in a series, with outcomes affecting subsequent negotiations.

First Mover

A company that gains a competitive advantage by being the first to market with a new product or service.

Second Mover

A firm that enters a market after a competitor has already established a presence.