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Technical Note--Price Promotions in Asymmetric Duopolies with Heterogeneous Consumers

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  • Maxim Sinitsyn

    (Department of Economics, McGill University, Montreal, Quebec H3A 2T7, Canada)

Abstract

In this note I investigate the outcome of a static price competition between a strong firm (a firm with an established loyal consumer base) and a weak firm (a firm without loyal consumers). The consumers are divided into the strong firm's loyal segment and the switching segment, members of which have heterogeneous tastes for the firms' products. In the presence of loyal consumers, for a large set of the parameters of the demand function, the firms use mixed strategies over a finite number of prices. These strategies can be interpreted as occurrences of sales. The most common case is that of the strong firm's using two prices and the weak firm's using one price. However, when both firms use sales, the weak firm promotes more often than the strong firm.

Suggested Citation

  • Maxim Sinitsyn, 2008. "Technical Note--Price Promotions in Asymmetric Duopolies with Heterogeneous Consumers," Management Science, INFORMS, vol. 54(12), pages 2081-2087, December.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:12:p:2081-2087
    DOI: 10.1287/mnsc.1080.0931
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    References listed on IDEAS

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    Cited by:

    1. Matthias Hunold & Kai Hüschelrath & Ulrich Laitenberger & Johannes Muthers, 2020. "Competition, Collusion, and Spatial Sales Patterns: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 737-779, December.
    2. Katja Seim & Michael Sinkinson, 2016. "Mixed pricing in online marketplaces," Quantitative Marketing and Economics (QME), Springer, vol. 14(2), pages 129-155, June.
    3. Hunold, Matthias & Muthers, Johannes, 2019. "Spatial competition and price discrimination with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    4. Maxim Sinitsyn, 2012. "Coordination of Price Promotions in Complementary Categories," Management Science, INFORMS, vol. 58(11), pages 2076-2094, November.
    5. Mantin, Benny & Rubin, Eran, 2018. "Price volatility and market performance measures: The case of revenue managed goods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 120(C), pages 35-50.
    6. Matthias Hunold & Johannes Muthers, 2018. "Spatial Competition with Capacity Constraints and Subcontracting," Economics working papers 2018-13, Department of Economics, Johannes Kepler University Linz, Austria.
    7. Maxim Sinitsyn, 2020. "Evaluating horizontal mergers in the presence of price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 39-60, March.
    8. Mathur, Sameer & Sinitsyn, Maxim, 2013. "Price promotions in emerging markets," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 404-416.
    9. Kai A.Konrad, 2010. "Merger Profitability in Industries with Brand Portfolios and Loyal Customers," Korean Economic Review, Korean Economic Association, vol. 26, pages 5-26.
    10. Christian Oertel & Armin Schmutzler, 2022. "Challenging the incumbent: Entry in markets with captive consumers and taste heterogeneity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 961-979, November.
    11. Maxim Sinitsyn, 2016. "Managing Price Promotions Within a Product Line," Marketing Science, INFORMS, vol. 35(2), pages 304-318, March.
    12. Zheyin (Jane) Gu & Xinxin Li, 2023. "Social Sharing, Public Perception, and Brand Competition in a Horizontally Differentiated Market," Information Systems Research, INFORMS, vol. 34(2), pages 553-569, June.
    13. Maxim Sinitsyn, 2017. "Pricing with Prescheduled Sales," Marketing Science, INFORMS, vol. 36(6), pages 999-1014, November.
    14. Sinitsyn, Maxim, 2022. "Price leadership with promotions," International Journal of Industrial Organization, Elsevier, vol. 82(C).

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