Your company sells sunglasses for $10. The unit cost is $7. You’re thinking about cutting the price by 50 cents. According to the best sales estimates, if you hold the price, you’ll have a 100% chance of selling 1,000 units. If you cut the price to $9.50, you’ll have an 80% chance of selling 1,250 units, and a 20% chance of selling only 1,000. What should you do?
A version of this article appeared in the October 2001 issue of Harvard Business Review.