Final answer:
When lowering prices leads to only a 36-month renewal, reevaluation of pricing strategy may be needed. Anticipating the monopolist's potential reaction, such as price reduction or product enhancement, is vital when entering their market.
Step-by-step explanation:
If you lower prices and attain only a 36-month renewal, it is important to consider this within the context of your broader business goals and market conditions. If a longer renewal period was expected or critical for your business sustainability, getting only a 36-month renewal after lowering prices might warrant a reevaluation of your pricing strategy, rather than considering it an outright success or simply ignoring the renewal period.
Entering a Monopolist's Market
Imagine you are managing a small firm and considering entering the market of a monopolist that is charging high prices. You've determined that charging 10% less than the monopolist could yield a profit. It is crucial to anticipate the monopolist's reaction to your entry. They might reduce their prices, introduce a superior product, or engage in strategies to lock in their customers long-term. Understanding these potential reactions can help inform your decision and pricing strategy to ensure the sustainability of your business in a competitive market.