Consider a company faced with a​ competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current​ price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor​ responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability ​(p​) of 0.8​, which means the other outcome would have only a 20 percent chance of occurring ​(1-p=0.2​). These outcomes are shown in the table​ below:

Question

Consider a company faced with a​ competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current​ price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor​ responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability ​(p​) of 0.8​, which means the other outcome would have only a 20 percent chance of occurring ​(1-p=0.2​). These outcomes are shown in the table​ below:

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