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Price-Induced Patterns Of Competition

In: Perspectives On Promotion And Database Marketing The Collected Works of Robert C Blattberg

Author

Listed:
  • ROBERT C. BLATTBERG

    (University of Chicago, A. C. Nielsen, USA)

  • KENNETH J. WISNIEWSKI

    (University of Chicago, A. C. Nielsen, USA)

Abstract

This research focuses on how price changes influence the observed pattern of brand competition. The paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition. A price-tier model is proposed to operationalize the theory and to allow predictive testing. The price-tier model is estimated on 28 brands across four product categories.The results show a specific asymmetric pattern of price competition. Higher-price, higher quality brands steal share from other brands in the same price-quality tier, as well as from brands in the tier below. However, lower-price, lower-quality brands take sales from their own tier and the tier below brands, but do not steal significant share from the tiers above. The results are consistent with a bimodal preference distribution, with the regular price indifference point being located toward the lower-quality end of the preference distribution for the categories analyzed.

Suggested Citation

  • Robert C. Blattberg & Kenneth J. Wisniewski, 2010. "Price-Induced Patterns Of Competition," World Scientific Book Chapters, in: Greg M Allenby (ed.), Perspectives On Promotion And Database Marketing The Collected Works of Robert C Blattberg, chapter 8, pages 125-143, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814287067_0008
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    Keywords

    Quantitative Marketing; Tracker Model; Customer Level Data; Marketing-Mix Modeling;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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