We conclude our study of the accounting side of decision making by introducing the possibility of competitive response, or strategic encounter. Adding a product to our product line may affect one or more competitors and may evoke a response. For example, they may decide to cede the new product’s market to us or they may retaliate with vigor. Extensive investment in R&D may scare off potential competitors. Access to proprietary technology may give us a cost advantage.
KeywordsPrivate Information Demand Curve Price Discrimination Expected Profit Cost Curve
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