If the discussion in Chapter 5 has shown us anything, it is that the manager’s decisionmaking problem is potentially very complicated when the manager takes into account all of the strategic effects and responses in the marketplace. In order to shed some light on how strategic interactions affect the manager’s decision-making problem, we will begin in this chapter by considering the simplest of the manager’s problems. As such, some of the analysis of this chapter may seem overly simplistic and restrictive. What we are really doing in this chapter is describing some basic models which we will be able to refine throughout the remainder of the text to consider more complicated aspects of themanager’s decision-making problem.