Simulation

At the beginning of the simulation, the Neutron was a unique product in the computer world. The company could view itself as a differentiated player in the competition PC market, or it could view itself as having a monopoly on the new product. To enjoy the full benefits of monopoly pricing, there needs to be inherent demand for the product. The Neutron, however, is new. Increasing the price moves the product up the demand curve. A higher price also signals to the market that the product is unique and valuable.

At the outset, with a new product and no competitors, there are two reasonable strategies. The first is penetration pricing, which would seek to maximize demand. This does not, however, maximize profit. The finance department may not approve of this strategy because it does not offer the best return to the shareholders. Likewise, the marketing department does not want...
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