In a market with a few large competitors, a pricing decision changes the next decision each rival makes. A forecast that assumes competitors will stand still can overstate the value of a price cut.
This chapter explains market concentration, the price-war payoff matrix and repeated competition. Compare targeted responses, added value and other options with a blanket cut. Base the analysis on public market information and make pricing decisions independently.
Put it to work
List the last five public price moves by each main competitor. Record the response, its timing and your own contribution outcome. Use that history to model a proposed move with and without a competitor match.
A question to try
Does the proposed price cut still work if the competitor matches it?
