Case _3 Reading (1).pdf

Case _3 Reading (1).pdf - Managerial Economics and Business...

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Managerial Economics and Business Strategy, 7e Case Study #3 Time Warner Memo To: Pricing Manager, District 6SW From: Vice President, Marketing Re: Strategic Pricing Decision Our (Time Warner’s) only competitor is District 6SW currently provides bundled services at $84.95. We are currently charging a 10% premium over their price, but there are unsubstantiated rumors that they are contemplating a 10% price increase. We don’t know their cost structure, so we don’t know whether their potential price increase is driven by cost increases or is merely a strategic move on their part. Historically, when we both charge the same price, our market share is about 65%. When we charge a 10 percent premium over their price, our market share declines to about 60%. It appears that in those instances where they have charged a 10% premium over our price, our
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