03 Jun Question Our only competitor in District 6SW cur
Question
Our only competitor in District 6SW currently provides bundled services at $84.95. We are
currently charging a 10% premium over their price, but there are unsubstantiated rumors that
they are contemplating a 10% price increase. We don’t know their cost structure, so we don’t
know whether their potential price increase is driven by cost increases or is merely a strategic
move on their part.
Historically, when we both charge the same price, our market share is about 65%. When we
charge a 10 percent premium over their price, our market share declines to about 60%. It
appears that in those instances where they have charged a 10% premium over our price, our
market share is about 70%.
Please provide a recommendation regarding whether we should maintain our current price or
reduce our price to $84.95. Please factor into your recommendation that we pay
programming fees to providers that amount to $32.50 for each subscriber. In addition,
maintenance, service and billing costs are about $7.60 per subscriber. At present, there
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