leslie7 wrote: ↑Fri Jan 29, 2021 11:13 am
I'm just wondering here and I could be wrong but for D to be correct do we not have to assume that producers leaving the market will equate to other companies coming in to take that vacancy?
As in, is that a reasonable assumption to make on the LSAT? (I just don't see this as being very air-tight).
Price reductions, causing others to leave the market could just leave a vaccuum or it could be substituted by another market all together. (Im speculating on the ideas here but my point is that the explanation of a "company can gain market share without purchasing a competitor" attacking the necessary conclusion, we have to assume thats a possibility here no ?
Hi Leslie,
Thanks for the question! No, you definitely do not have to make that assumption. The conclusion here was that the only way to gain market share was to purchase a competitor. So, looking at it from the standpoint of a hypothetical company, who we will call Acme, according to the author Acme can
only gain more market share by buying another company. That's it, that's the only way according to the author. What (D) comes in and says is that there's a different route to getting market share, one that doesn't involve buying a competitor. You can instead drive some current companies out of the market. What happens then? Well, the market share of that driven-out company is then available to be taken by other companies, including Acme. That scenario does not involve relying on the assumption that new companies come into the market at all. But what it does do is suggest a different route than buying a competitor, and that means that buying a competitor is not necessary to gaining market share
Please let me know if that helps. Thanks!