What 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?