ABSTRACT
Price changes often have traceable effects beyond their immediate impact on the profits of the firm taking the action. A chain of competitive reacV tions can even change substantially the competiV tive positions of the competing firms and shape the profitability of an entire industry. Aggressive price reduction, for example, can lead competitors to withdraw from the market, as happened with Fairchild, Bowmar and Rockwell when Texas Instruments led the way down with its prices for pocket calculators.1 In other situations, competiV tors may redouble their efforts to retain volume and reply with even further reductions, as hapV pened in the disposable razor market when Gil-!ette reacted to BIC’s pre-announced strategy of price-cutting.2
