The idea
If B keeps its price, A earns more by cutting; if B cuts, A still earns more by cutting. B reasons the same way. Both cut and earn 70 instead of 100. Economists call this stable bad outcome a Nash equilibrium: no one gains by changing alone. The way out is to remember that operators play this game every month for years.
Use it thoughtfully
- Expect any visible cut to be matched.
- Model your plan with the competitor's match included.
- Look for moves that do not invite a match.
An example
ILLUSTRATIVE EXAMPLE: Two Indonesian operators each cut a popular pack to win share. Within weeks both have matched, and both earn less than before.
A question to try
If you cut price next month, what would your competitors' best response be?
A useful framework is a starting point, not a guarantee. Effects vary with the audience, product and situation. Use truthful evidence, respect customer choice, and test the result.