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Product Positioning Under Price Competition

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Author Info

  • S. Chan Choi

    (Department of Marketing and Quantitative Studies, San Jose State University, San Jose, California 95192-0069)

  • Wayne S. Desarbo

    (Marketing and Statistics Departments, University of Michigan, Ann Arbor, Michigan 48109-1234)

  • Patrick T. Harker

    (Decision Sciences Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6366)

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    Abstract

    This paper presents a consumer-based methodology for new product pricing and positioning in the face of price competition. The price competition is modelled as a Nash equilibrium for which two complementary approaches are employed: an analytical approach of duopoly provides qualitative insights into the competitive behavior, and a numerical approach of general oligopoly provides quantitative solutions under a wide variety of market scenarios. The optimal product positioning is formulated as a Stackelberg-Nash (leader-followers) equilibrium which can be solved numerically using recent advances in the field of variational inequalities. A small example concerning analgesics is used to illustrate this methodology.

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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 36 (1990)
    Issue (Month): 2 (February)
    Pages: 175-199

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    Handle: RePEc:inm:ormnsc:v:36:y:1990:i:2:p:175-199

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    Related research

    Keywords: marketing: competitive strategy; product policy; games; noncooperative; programming; variational inequalities;

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    Cited by:
    1. Chen, Jing & Grewal, Ravneet, 2013. "Competing in a supply chain via full-refund and no-refund customer returns policies," International Journal of Production Economics, Elsevier, vol. 146(1), pages 246-258.
    2. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-76, September.
    3. de Palma, A. & Sanchez, O., 1998. "Accessibilite dans un systeme de transport en environnement concurrentiel," Papers 9804, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    4. Gruca, Thomas S. & Klemz, Bruce R., 2003. "Optimal new product positioning: A genetic algorithm approach," European Journal of Operational Research, Elsevier, vol. 146(3), pages 621-633, May.
    5. Windrum,Paul, 1999. "Unlocking a lock-in: towards a model of technological succession," Research Memorandum 010, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    6. Bhadury, J. & Eiselt, H. A., 1999. "Brand positioning under lexicographic choice rules," European Journal of Operational Research, Elsevier, vol. 113(1), pages 1-16, February.
    7. Windrum,Paul & Birchenhall,Chris, 2002. "Technological diffusion, welfare and growth: technological succession in the presence of network externalities," Research Memorandum 038, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    8. Eiselt, H. A. & Laporte, Gilbert, 1997. "Sequential location problems," European Journal of Operational Research, Elsevier, vol. 96(2), pages 217-231, January.
    9. Benati, Stefano & Hansen, Pierre, 2002. "The maximum capture problem with random utilities: Problem formulation and algorithms," European Journal of Operational Research, Elsevier, vol. 143(3), pages 518-530, December.
    10. Nuno Faísca & Pedro Saraiva & Berç Rustem & Efstratios Pistikopoulos, 2009. "A multi-parametric programming approach for multilevel hierarchical and decentralised optimisation problems," Computational Management Science, Springer, vol. 6(4), pages 377-397, October.
    11. Mark B. Vandenbosch & Charles B. Weinberg, 1997. "A value analysis model for farm equipment manufacturers," Agribusiness, John Wiley & Sons, Ltd., vol. 13(4), pages 409-421.
    12. Baier, Daniel & Gaul, Wolfgang, 1998. "Optimal product positioning based on paired comparison data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 365-392, November.
    13. Hadjinicola, George C. & Kumar, K. Ravi, 2002. "Modeling manufacturing and marketing options in international operations," International Journal of Production Economics, Elsevier, vol. 75(3), pages 287-304, February.

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