Carcinogens-R-Us and Lung Decay, two cigarette producers of comparable size, are struggling for market share in a declining market. Carcinogens-

R-Us has just undergone a leveraged buyout and is able to meet its fixed expenses with its existing market share, but it may be forced into bankruptcy if it loses market share. As a manager of Lung Decay, how would you establish your pricing policy? If Carcinogens-R-Us enters bankruptcy, it would either

(a) be forced to liquidate,

(b) lose market share because of customer concerns, or (c)

emerge recapitalized with no harm to market share. How would these three possibilities affect your decision?

AppendixLO1