If an Aggressive Competitor Cuts Prices, What Action Can a Strategist

question 19

Essay

If an aggressive competitor cuts prices, what action can a strategist take to minimize the damage and respond in the most cost-effective way? Under what conditions should a strategist merely ignore an aggressive price move by a competitor?

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Definitions:

Binding Price Floor

A legally established minimum price above the equilibrium price, causing a surplus in the market.

Hybrid Cars

Vehicles powered by a combination of an internal combustion engine and one or more electric motors, utilizing both fuel and electricity.

Consumer Surplus

The gap between what consumers are prepared to pay for a good or service and what they actually do pay.

Binding Price Floor

A minimum price set by the government for certain goods and services that is above the equilibrium price, causing a surplus.