Question: 14. Two companies, A and P, competing for the same product, are sharing a market. Each of these attempts to raise its share of the
14. Two companies, A and P, competing for the same product, are sharing a market. Each of these attempts to raise its share of the market. An advertising campaign by A can increase its share of the market by 7 per cent provided that P does nothing. Company P contemplates invoking a price cut if it is worthwhile. The price cut shall cause a 5 per cent gain to the company P, but the gain is subject to the condition that A takes no action. A price cut by P, accompanied by the advertising campaign of A shall lead to a 2 per cent rise in P's share of market. No action on part of both the companies shall leave the market share for them undisturbed at 40 : 60.
Write the information in form of a paY-offtable and suggest the best strategy for each of the companies to follow.
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