White Water Rafters, Inc., (WWR) a competitor of yours, provides rafting tours on the Colorado River. WWR pays tour guides fixed salaries of $170,000 per year. You are the owner of Black Water Rafting (BWR), and you pay your tour guide salaries based on a per rafter rate of $42.50. Rafters are currently charged $50 per tour by both of the rafting companies. You both expect to provide 4,000 tours during the year.
In an effort to increase their business, WWR drops its price to $40 per rafter and expects to serve 6,000 rafters, leaving your company (BWR) with the remaining 2,000 rafters. What do you do? Can you meet that price? Can you charge less than $39? (you can use qualitative and quantitative possibilities)
Describe what would you do as a defensive strategy? Why?