Suppose Philips and Toshiba Are the First Companies to Introduce

question 133

Essay

Suppose Philips and Toshiba are the first companies to introduce digital versatile disk (DVD)machines to the market.Studies by the firms suggest that consumers who purchase consumer electronics are very brand-loyal.To capture future loyalties,each firm will attempt to maximize its initial market share,for one time only,by setting prices.An economist has estimated the initial market share of each firm under different pricing scenarios.Her results are captured in the following payoff matrix:
$$\begin{array}{l}\quad\quad\quad\quad\text { Toshiba }\\\text { Philips }\begin{array} { | l | l | l | l | } \hline \text { Strategy } & \mathrm { P } = \$ 250 & \mathrm { P } = \$ 500 & \mathrm { P } = \$ 1,000 \\\hline \mathrm { P } = \$ 250 & 60 \% , 40 \% & 75 \% , 25 \% & 95 \% , 5 \% \\\hline \mathrm { P } = \$ 500 & 25 \% , 75 \% & 90 \% , 10 \% & 75 \% , 25 \% \\\hline \mathrm { P } = \$ 1,000 & 5 \% , 95 \% & 25 \% , 75 \% & 70 \% , 30 \% \\\hline\end{array}\end{array}$$ a.Given this scenario,if you were in charge of pricing at Philips,what price would you charge?

b.What market share would you anticipate as a result of your pricing strategy?

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Definitions:

Multiple Roles

Refers to the various roles an individual may play simultaneously in society, such as being a parent, employee, and student.

Marriage Rates

The number of marriages within a given population size or group per unit of time, typically expressed as marriages per year per 1,000 people.

Total Institutions

Places of residence and work where a large number of like-situated individuals, cut off from the wider society for an appreciable period of time, together lead an enclosed, formally administered life.

Goffman

Erving Goffman, a Canadian-American sociologist known for his analysis of social interaction and the concept of the presentation of self in everyday life.