In a market where Firm A and Firm B are leading suppliers,if Firm A initiates a price cut,the likelihood that Firm B responds with an identical price cut will be greater:
A)If Firm B's goal is to maximize profit
B)If Firm B's goal is to maximize market share
C)If Firm B is a private rather than a public (listed)company
D)If the market is growing.

Question

Quizplus · Accepted Answer

If Firm B's goal is to maximize market share, they are more likely to respond with an identical price cut in order to maintain their market share and avoid losing customers to Firm A. If Firm B's goal is to maximize profit, they may not respond with an identical price cut if it would result in lower profits. The private or public status of Firm B is not likely to have a significant impact on their response, and the growth of the market does not indicate how Firm B will respond to a price cut by Firm A.

In a Market Where Firm a and Firm B Are