Decision Point: Determining Pricing for a Regional Market

The managers of Cullinart's, one of your primary national competitors, approach you with an offer that could potentially increase the profits for both of your firms.

As is typical for most national chains, profits in some regions of the country are greater than in others. The managers at Cullinart's want to capitalize on the strength of their brand in the Southeast and allow Gustable's to capitalize on its strength in the Northwest.

After a long meeting, their plan boils down to this: Over the next five years, each firm would reduce its presence in these respective regions by 25 percent, which should produce a net profit increase of 15 percent for both firms in these respective regions. The managers at Cullinart's are aware of the antitrust laws against "market division," but they are confident that their plan would not violate these laws.

Your team is of two minds on this strategy.

a) Team Go for It says, "Market division restrains trade by creating monopolies in a given region. We are not creating monopolies in either region because we would still have a market presence in the Southeast, and there are other supermarkets there as well. This is a good deal!"

b) Team Don't Do It says, "Market division isn't just about entirely dividing up a market. It's also about what that market division entails. In this case, it would mean decreased competition in these regions, which would allow each firm to set higher prices. That's a violation of antitrust law."

What do you do?

Select an option below from the choices below andclickSubmit.

You decide to reject the offer by Cullinart's.

You agree to the deal with Cullinart's.