Time Warner shares 110,000 subscribers with a single competitor, District 6SW. Each firms' market share depends upon its own price and the price changed by its rival's according to the following matrix, where the strategy space consist of {$84.95, $93.45}.
Price-Market Share Matrix
Top- District 6SW Left side- Time Warner
Strategies
PL=$84.95
PH+$93.45
PL=$84.95
65%, 35%
70%, 30%
PH=$93.45
60%, 40%
65%, 35%
Price-Payoff Matrix
Strategies
PL=$84.95
PH=$93.45
PL=$84.95
$3,206,775
$1,726,725-C2
$3,453,450
$1,760,550-C1
PH=$93.45
$3,521,100
$1,973,400-C3
$3,814,525
$2,053,975-C4
Based on this information Time Warner can lead the Market Share Matrix with a price of $84.95. That means that they would either control 65% or 70% of the market, depending on what District 6SW chooses as a price. That seems like it would be the correct choice for pricing too, but in fact it does not lead to the maximum pricing. As you can see in the second box, the two highest prices for Time Warner are at the rate of $93.45. This shows how the market share can be somewhat misleading, if your not making sure that the company is reaching its top profit instead of top market share. If the goal is to reach top market share, then Time Warner should price at $84.95, but if they want to reach the highest potential profit they should price at $93.45
Price-Market Share Matrix
Top- District 6SW Left side- Time Warner
Price-Payoff Matrix
$1,726,725-C2
$1,760,550-C1
$1,973,400-C3
$2,053,975-C4
Based on this information Time Warner can lead the Market Share Matrix with a price of $84.95. That means that they would either control 65% or 70% of the market, depending on what District 6SW chooses as a price. That seems like it would be the correct choice for pricing too, but in fact it does not lead to the maximum pricing. As you can see in the second box, the two highest prices for Time Warner are at the rate of $93.45. This shows how the market share can be somewhat misleading, if your not making sure that the company is reaching its top profit instead of top market share. If the goal is to reach top market share, then Time Warner should price at $84.95, but if they want to reach the highest potential profit they should price at $93.45