Competitor's Price
ABC Industries Is About to Launch a New

question 64

Essay

Competitor's Price
ABC Industries is about to launch a new product and must decide to set the price of the product at either high,medium,or low.The annual payoff for ABC will depend on the price set on a competing product that will be introduced in the near future.The table below shows the annual payout for each combination of prices.
Competitor's Price
$$\begin{array} { | l | c | c | c | } \hline \text { AEC Price } & \text { High } & \text { Medium } & \text { Law } \\\hline \text { High } & \$ 60,000 & \$ 25,000 & - \$ 20,000 \\\hline \text { Medium } & \$ 35,000 & \$ 46,000 & - \$ 4,000 \\\hline \text { Lan } & \$ 18,000 & \$ 12,000 & \$ 8,000 \\\hline\end{array}$$
-What price should ABC choose using the maximax criterion?

---

Definitions:

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and made available for use.

Trade-in Allowance

The amount credited to a buyer by a seller for the property or goods being part-exchanged.

Accumulated Depreciation

The total depreciation for an asset that has been recorded up to a specific point in time, reflecting its decline in value.

Fair Market Value

The price at which an asset would exchange hands between a willing buyer and seller, both having reasonable knowledge of all necessary facts.