Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 12

The PPP Company recently purchased a large chain of supermarkets (over 1,000 stores). Following this acquisition, PPP's management announced its plan to cut labor costs dramatically so that the stores could remain competitive. Labor unions responded by saying that they would not agree to large wage cuts. After negotiating with a labor union for a short time, PPP announced that it was closing several of its most profitable stores because labor would not agree to wage cuts.
On the surface, this seemed like a silly move, given that the stores were profitable. Why do you think PPP made this move