Beauregard Textile Company is assessing estimating method for its item T-30 whether it ought to charge $3 or $4 per yard. Its rival is constantly charging the $3 regardless of making misfortunes and troublesome money related condition. On the off chance that Beauregard keeps charging $4, it will have the piece of the overall industry of just 33% while $3, Calhoun and Pritchard has the piece of the pie of around 66%. On the off chance that Beauregard diminishes its cost to $3, it will pick up its clients back as a result of its area leverage, however it won't be beneficial at this cost. This entire case speaks to a circumstance of Prisoner Dilemma where both would be in an ideal situation just on the off chance that if Beauregard proceeds with its cost of $4 while Calhoun and Pritchard additionally build its cost to $4. In this circumstance, business sector size would be diminished by around 20%, yet both these organizations would make benefits.
Quarterly Prices and Sales Volumes for T-30 Fabric, 1988-1990
Beauregard’s Estimated Cost per Yard of Triaxx-30 at Various Volumes of Production
Contribution Margin Calculations
Case 1Beauregard Textile Company drops its price to $3 for 4th Quarter
Case 2Beauregard Textile Company Keeps its price to $4 for 4th Quarter
Case 3Beauregard Textile Company Keeps its price to $4 for 4th Quarter while Calhoun and Pritchard raises its prices to $4
Case 4Beauregard Textile Company Keeps its price to $3 for 4th Quarter while Calhoun and Pritchard raises its prices to $4