Here again you need to know somehow your demand function. In the example attached you will find a competitor dropping its price from $ 6.00 to $ 5.00 this is 16.657 %. Now, you have two extreme alternatives.
Alternative A is to follow the drop-price move and alternative B is to don’t follow the drop-price move. In both alternatives you are expected to lose money, but if you choose alternative B you will lose the same as alternative A only if sales drop 50.25% (equal to 1,990 units). If sales don’t drop that much you will be in a better position than in alternative A.
A third alternative will be to follow the competitor but partially.
You can try all the alternatives in the next spreadsheet model: breakeven-sales-analysis-competition