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Should we match a price cut?
The prompt
A rival cut its price by 10 percent. We sell 1,000,000 units a year at USD 20, earning a contribution of USD 5 per unit (a 25 percent margin). If we match, contribution falls to USD 3 per unit and we keep all our volume. If we hold our price, we will lose some volume; the table below shows how each customer segment reacted the last time a rival cut price. Which is better, and when should we reconsider?
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