This workflow develops very simple Dynamic Competition around a Commodity Market between two Competitors selling identical Products.
The workflow builds upon the earlier Building Blocks workflow BB-111 Commodity Static Competition. But the assumption of Static Competition, that a Competitor will not react to a change in the Market, is no longer held.
This workflow follows an action-reaction-reaction model. That is, each Competitor independently sets a Profit Maximizing Price (each assuming the other Competitor will maintain their existing Price). After the Competitors see the combined results, each again tries to independently set a new Profit Maximizing Price.
After many such rounds of Competition the Prices in the Market are expected to reach Marginal Costs. At that point, neither Competitor would be profitable.
See also (advanced users only): MO-111 Commodity Price War
Dynamic Commodity Market
Dynamic competition occurs over many rounds of competitive action-and-reaction. Here, both Competitors simultaneously try to set their Profit Maximizing Price. Neither expects the other Competitor to be doing the same.
This competitive dynamic is repeated twice.
The two Competitive Products (Spacely Sprockets and Cogswell Cogs), along with their WTP Customer Distributions, are now completely defined.
As the Products are identical, the Cogswell Cogs Demand Curve also says that $105 is the Profit Maximizing Price.
Optimize #3 / #4
Both Competitors again assume that the other will maintain their Price at the old $105. Note that the original WTP Matrix does not change as Willingness To Pay is not related to Price (it is Consumer Surplus that takes Price into account).
Both expect that the new Profit Maximizing Price of $102.25 they will win 4,767 Customers and make a Profit of $249,076 (down from the last round of expectations).