The post-Covid new normal includes lots of outdoor activities like trail running, golf, and tennis. Nike is ready to meet the surging demand for sports shoes and apparel.—reuters.com
In what type of market do producers of running shoes compete?
The running shoe market is an example of monopolistic competition. Many firms sell running shoes and each firm’s brand is slightly different. Firms compete on product quality, price, and marketing, and firms can enter or exit the market.
How does the “post-Covid new normal” impact the running shoe market? How does Nike respond in the short run?
What will happen in the running shoe market in the long run?
Nike’s economic profit is an incentive for new firms to enter the running shoe market. As new firms enter the market, the demand for Nike shoes decreases. Firms will continue to enter until all firms, including Nike, make zero economic profit.
Nike will attempt to prevent this outcome with innovation. Nike will create a new running shoe, with the goal of increasing the demand for its running shoes. If Nike’s new shoe is popular, Nike will make an economic profit, new firms will enter, and the cycle will begin again.
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