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Answer :
(a) If Company A's competitors match the $2.40 price increase, the price elasticity that Company A should expect is -0.90.
(b) If Company A's competitors do not match the price increase, the price elasticity that Company A should expect would be greater (more negative) than -0.90.
(c) If competitors adopted a cooperative stance, they would most likely match Company A's price increase.
(d) Company A uses Market research,Trade publication ,company financial statement .
a) This is because the category price elasticity of -0.90 assumes that all companies in the category have the same price changes, which is the case here.
b) For example, it could be -1.50. This is because when competitors maintain their prices, customers are more sensitive to price changes from Company A, leading to a greater decrease in demand for each increase in price.
c) To determine if they would cooperate, Company A needs information on: 1) Competitors' pricing strategies and history, 2) Their cost structure and profit margins, and 3) Market share and competitive positioning.
(d) To get this information, Company A could use:
1) Market research reports, which provide insights on competitors' strategies and market positioning;
2) Trade publications, which often discuss industry trends, pricing strategies, and companies' performance; and
3) Company financial statements, which provide information on competitors' cost structures and profit margins.
These sources are reliable for obtaining relevant competitive information.
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Complete question:
Company A has been selling 200 units per month of a product at a price of $12 per unit. The two competitors of Company A have also been selling that product at $12 per unit.
The manager of Company A is now considering increasing the price of this product by $2.40.
(a) Assume that the category price elasticity in this product category is -0.90. If Company A's two competitors match the $2.40 price increase, what is the price elasticity that Company A should expect? Explain your reasoning.
(b) If Company A's two competitors do not match Company A's price increase and maintain their current prices, would the price elasticity that company A should expect be greater or be lower than the one you gave in Part (a)?
Give an example of that greater or lower price elasticity. Then, using the tourse material, explain your reasoning.
(c) If Company A's two competitors adopted a cooperative stance, what would most likely be their response to Company A's price increase?
Describe three pieces of information about Company A's two competitors that would help Company A determine if they would adopt a cooperative stance in this situation.
(d) How would you get the information you mentioned in Part (c)?
Describe three of the sources of competitive information that were discussed in the course material and explain why each of these sources would be able to provide relevant competitive information
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