Competitor dynamics analysis
TITAN is the dominant steel producer in the US, but its global competitor GIANTS has gained some sizeable market share in the US recently by expanding into US via acquisitions. TITAN currently has a 40,000-ton capacity plant and GIANTS has two plants - a 16,000-ton plant and a 4,000-ton plant. Suppose these are the only two producers of steel in the US. The current market price is $5M per 1000 tons, and variable costs are $2M per 1000 tons. Assume fixed costs are negligible relative to variable costs, and the quality of steel produced across plants is identical. At current market price there is significant overcapacity, so each firm only produces 50% of its total capacity, i.e. the production level for TITAN is 20,000 tons and that for GIANTS is 10,000 tons respectively.
Fill in the payoff structure in the following matrix. (TITAN payoff , GIANTS payoff )
|
|
GIANTS |
|
|
|
Maintain Price |
Lower Price |
TITAN |
Maintain Price |
( ① M , ② M ) |
( ③ M , ④ M ) |
Lower Price |
( ⑤ M , ⑥ M ) |
( ⑦ M , ⑧ M ) |
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