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19 November, 07:17

The Starfire Coffee chain was the only coffee-shop chain and meeting place in many American cities for more than 12 years. People paid $5 for a mug of peppermint coffee and the experience of sitting in front of a roaring fire, chatting with friends. Twelve years after Starfire's appearance, a similar coffee-shop chain, Reindeer Brews, entered the marketplace. Reindeer charges $3 for a mug of hot cocoa and a similar community experience.

How would you characterize this scenario?

- Non-price competition in a monopolistic market

- Non-price competition in a purely competitive market

- Price competition in a monopolistically competitive market

- Price competition in a purely competitive market

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Answers (1)
  1. 19 November, 07:22
    0
    Answer: In this particular case we can reason that this scenario represents monopolistic-ally competitive market.

    Both coffee house are offering a similar product and commodity, with only little differentiation in their design.

    i. e. The Starfire Coffee chain provided consumer with peppermint coffee and the experience of sitting in front of a roaring fire, chatting with friends.

    whereas Reindeer provided consumer with a mug of hot cocoa and a similar community experience.
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