Times Warner Memo 7 on p.570.

First, think of the best way to present your payoffs (what are they going to be market shares? revenues? profits?). Second, draw up a game matrix, perform the necessary calculations and fill it out to the best of your ability. Finally, analyze the game and determine what strategy would be the best for us to play. Explain why.

Memo 7 To: Pricing Manager, District 6SW From: Vice President, Marketing Re Strategic Pricing Decision Our only competitor in District 6SW currently provides bundled services at $84.95. We are currently charging a 10 percent premium over their price, but there are unsubstantiated rumors that they are contemplating a 10 percent price increase. We don't know their cost structure, so we don't know whether their potential price increase is driven by cost increases or is merely a strategic move on their part. Historically, when we both charge the same price, our market share is about 65 percent. When we charge a 10 percent premium over their price, our market share declines to about 60 percent. It appears that in those instances where they have charged a 10 percent premium over our price, our market share is about 70 percent. Please provide a recommendation regarding whether we should maintain our into your recommendation that we pay programming fees to providers that amount to $32.50 for each subscriber. In addition, maintenance, service and billing costs are about $7.60 per subscriber. At present, there are about 110,000 households in the relevant area. current price or reduce our price to $84.95. P lease factor