You woke up this morning to a troubling advertisement on TV: A+ Rental Cars' local competitor is discounting their economy rentals. After doing a little digging, you discover that your competitor has...

You woke up this morning to a troubling advertisement on TV: A+ Rental Cars' local competitor is discounting their economy rentals. After doing a little digging, you discover that your competitor has launched an aggressive advertising campaign, reducing the price on their economy line from $32.99 to $24.99. Based on your knowledge of previous pricing practices, you expect a similar price reduction across all vehicle types.

In your memo or short business report, include answers to the following questions:

1. How will A+ Rental Cars' weekly revenue be affected by the price cut if you maintain the revenue maximizing price that you specified previously?Hint:If you did not include Pcomp in your estimated demand curve, then perhaps you should revisit this decision. *THIS SHOULD BE IN PARAGRAPH FORM

2. Should A+ Rental Cars respond to the competition by reducing their price as well, or ignore the actions of the competitor and run the business as usual? If you decide that a price cut is preferred, how deep should the discount be? Can game theory be used to analyze this situation? Explain your reasoning and methodology thoroughly. *THIS SHOULD BE IN PARAGRAPH FORM

3. It would be labor intensive to re-analyze your situation every time your competitor changed their prices. Is there a way to develop a formula that would help you quickly pick a price in response to the price setting behavior of your competitor? Be as systematic as possible. A general, concise solution is ideal. Document the process you used to arrive at the "formula".*THIS SHOULD BE IN PARAGRAPH FORM