Which of the following statements best represents a first-mover advantage in economics?

• A. A firm that only competes in markets with established demand.
• B. A firm that reduces its prices after competitors have already set theirs.
• C. A firm that waits for competitors to enter the market and then imitates their products.
• D. A firm that enters a market before its competitors and secures brand loyalty among consumers.

Answer: (D)

Verified step by step guidance

1. Understand the concept of 'first-mover advantage' in economics: it refers to the benefits a firm gains by entering a market before its competitors.
2. Identify key characteristics of first-mover advantage, such as securing brand loyalty, establishing strong customer relationships, and possibly setting industry standards.
3. Analyze each option to see if it reflects these characteristics. For example, entering a market before competitors and gaining brand loyalty aligns with first-mover advantage.
4. Recognize that firms entering after competitors or imitating products do not gain first-mover advantages; instead, they might face challenges like overcoming established brand loyalty.
5. Conclude that the statement 'A firm that enters a market before its competitors and secures brand loyalty among consumers' best represents the first-mover advantage.