a. As you face more competitors do you become more or less aggressive, i.e. do y

Question

a. As you face more competitors do you become more or less aggressive, i.e. do you lower or raise your price? Why?

b. Which markets are the most competitive: those with few or with many competitors?

713804-XLS-ENG ()xlsx Excel FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Curtis, Michael X, Times New Roma-12 .1 A" A, 9- wrap Text B 1 u . ?· ?. A . ?? ??? ?Merge & Center- AutoSum Fill Clear- s-% ,??Conditional Format as Cell Formatting Table Styles Insert Delete Format Voltage Paste Voltage Clipboard G6 Sort &Find;& Filter- Select Font Alignment Number Cells Editing 4) Number of Competitors You are a manufacturer of"white box" modems, ie.. modems without a brand name, and have one or more competitors in your market. Despite the advanced nature of the product, white box' modems are all very similar, so there is essentially no differentiation. Since you and your competitors all outsource production to the same firm, you all have the same cost structure: no fixed cost and a per unit variable cost of $40. Moreover, outsourcing allows you to produce 'on demand, thus perfectly matching capacity to the demand that materializes. All firms in the market thus have only one choice the price of their modems Your competitors have already (ireversibly) announced their price to be S70 (which is not necessarily optimal). Now it is your turn to choose your price. Please find your optimal price under the following 2 scenarios, which have the same market structure and identical market size (100) but differ in the number of competitors in the market. (You should try out different prices to find the best one. To speed the process, it sufficed to consider integer numbers for prices.) No of Competitors' price Your price Your quantity Your profit s (incl you) Scenario1 of Com READY + 100% 9:14 PM s 6/3/2018

Explanation / Answer

a. With more competitors we become more aggressive i.e. price cut becomes more imminent. This happens in case of a competitive market where the demand is downward sloping. To capture a greater market share, the price must be cut.

b. The markets with many competitors are the most competitive. It is difficult to sell in a market with many competitors as everyone is competiting for a share in the overall sales.

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