What questions should a firm consider if it is in a nonhomogeneous market and a competitor lowers its prices?
What will be an ideal response?
A firm should consider:
? Why did the competitor change the price? To steal the market, to utilize excess capacity, to meet changing cost conditions, or to lead an industry-wide price change?
? Does the competitor plan to make the price change temporary or permanent?
? What will happen to the company's market share and profits if it does not respond? Are other companies going to respond?
? What are the competitors' and other firms' likely responses to each possible reaction?
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a. True b. False