Regal Electrogas: Price Leader or Price Follower

In late June 1987, Mr. Asad Ali, proprietor of Regal Electrogas, was confronted with an important decision regarding the pricing of his company’s desert coolers. The market price for this product had risen by approximately 5 percent in the wake of new taxes introduced in India’s national budget which was announced 2 weeks earlier. However, the taxes had recently been rescinded in response to public pressure following the announcement. Given this backlash, Asad wondered whether he should reduce his prices immediately.