ABSTRACT
Pricing against competition is more challenging and hazardous than pricing a unique product.1 In the absence of competition, managers can anticipate the effect of a price change entirely by analyzing buyers’ price sensitivity. When a product is just one among many, however, competitors can wreak havoc with such predictions. Price discounting in competitive markets-whether explicit or disguised with rebates, coupons, or generous payment terms-is almost a sure bet to enhance immediate sales and profits. It is easy to become seduced by these quick highs and fail to recognize the long-term consequences. The price cut that boosts your sales today will invariably change the industry you compete in tomorrow. Frequently, that change is for the worse.
