What is Competitor Reactions to Price Changes ?

What is Competitor Reactions to Price Changes?

Price of a product varies and is affected by so many factors. All depends upon the strategy which company adopts for setting a price. In free markets, price is set by market forces. Competitors are also included in external environment and if we are dealing in highly competitive market, we need to be very careful about the competitor’s pricing strategy. Immediate reaction to that strategy is known as “Competitor Reactions to price Changes” Pro active approach is also used in this type of situation. Companies are closely observing the next move of their competitor. For example; if company A is changing the price of a product, its competitor company B will also go for it, just to compete in the market.