A Firm That Is First to the Market with a New

question 158

Multiple Choice

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

• A)The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
• B)They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
• C)Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
• D)The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

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Definitions:

Majority Vote

A decision rule in which more than half of the votes cast determine the outcome of an election or decision.

Discretion

The power or right to make decisions based on one's own judgment rather than following a strict rule or protocol.

Rules Of Agency

Guidelines governing the relationship between a principal and an agent, where the agent acts on behalf of the principal.

Officers

Officers are individuals charged with the management and operational duties within an organization, often holding specific titles and responsibilities.