A smartphone manufacturer sets the price of its new model $50 below its closest competitor to attract price-sensitive customers. Which of the following is the primary drawback of competition-based pricing?
1
It ignores the company’s cost structure and profit margins.
2
It makes the product appear inferior in quality.
3
It discourages competitors from innovating.
4
It prevents companies from engaging in price wars.
5
It leads to overestimating customer value perceptions.