ibps-so 2024 · Question 166 of 209

A new entrant in the soft drinks market launches a cola at ₹15 per bottle, while the market leader sells at ₹20. The new brand’s demand is highly elastic. The market leader immediately reduces its price to ₹15 as well, and both brands end up with the same market share as before the price cut. What does this situation most directly demonstrate about the new entrant’s original pricing strategy?

1. AThe new entrant successfully used premium pricing to signal higher quality, but competitors failed to respond
2. BThe new entrant’s penetration pricing failed to increase its market share because competitors followed the price cut instantlyCorrect
3. CThe new entrant should have used cost-plus pricing to ensure a minimum profit margin regardless of competitor reaction
4. DThe new entrant’s skimming pricing worked well in the short run, but long-run profits declined due to price wars
5. EThe new entrant should have bundled its cola with another product to avoid direct price comparison