New Phone ShorTech, is a smaller company that makes of knockoff consumer electronic devices including its Quadrant mobile phone. Sales had been doing okay for a number of months before ShorTech launched a massive advertising campaign in which it shows
that its phone can do just about everything the industry leader phone can do. What change in pricing would you suggest for the Quadrant phone concurrent with the campaign?
The advertising campaign will inform a lot more people about the product and so shift the demand out. But because of ShorTech's history of making knockoffs and because its phone is only almost as good as the leading phone, it is likely to attract more demand elastic customers. In this case, the optimal price-cost margin falls. You should suggest a sale during the campaign.
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