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Competitive Positioning in Markets with Nonuniform Preferences

Author

Listed:
  • Asim Ansari

    (University of British Columbia)

  • Nicholas Economides

    (New York University)

  • Avijit Ghosh

    (New York University)

Abstract

We investigate the nature of competitive equilibrium for brands competing in a multi-attribute product space when consumer preferences for product attributes follow nonuniform distributions. We establish subgame-perfect equilibria in a two-stage game, where firms choose positions in the first stage and prices in the second stage. Two types of entry scenarios are investigated. In the first, the number of brands is given exogenously, and all of them choose positions simultaneously. In the second scenario, firms enter in sequence, and the early entrants can choose strategies to deter the entry of later entrants. We find the equilibria for two, three, and four brands for consumer preferences that follow a beta distribution. Nonuniform distributions result in equilibrium configurations that are substantially different from those obtained for uniform consumer distributions. In the two brands case, for sufficiently concentrated distributions we find asymmetric position equilibria with one firm at the corner of the market and one firm at an interior position. In the case of three brands, for sufficiently concentrated preferences we find symmetric equilibria that do not yield maximal differentiation. We also establish an equilibrium for the case of four competing brands. In addition we characterize entry deterring positioning strategies and examine how they vary with the distribution of consumer preferences.

Suggested Citation

  • Asim Ansari & Nicholas Economides & Avijit Ghosh, 1994. "Competitive Positioning in Markets with Nonuniform Preferences," Marketing Science, INFORMS, vol. 13(3), pages 248-273.
  • Handle: RePEc:inm:ormksc:v:13:y:1994:i:3:p:248-273
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    File URL: http://dx.doi.org/10.1287/mksc.13.3.248
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kieron J. Meagher & Klaus G. Zauner, 2008. "Uncertainty in Spatial Duopoly with Possibly Asymmetric Distributions: a State Space Approach," CEPR Discussion Papers 579, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    2. David Encaoua, 1996. "Ouverture à la concurrence des activités en réseau. Le cas du transport aérien européen," Revue Économique, Programme National Persée, vol. 47(6), pages 1269-1296.
    3. Nadarajah, Saralees & Kotz, Samuel, 2009. "Models for purchase frequency," European Journal of Operational Research, Elsevier, vol. 192(3), pages 1014-1026, February.
    4. Ulrike Schuster & J?rgen W?ckl, 2005. "Optimal Defensive Strategies under Varying Consumer Distributional Patterns and Market Maturity," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 1(2), pages 187-206, July.
    5. Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, pages 557-574.
    6. Julia Cage, 2014. "Media Competition, Information Provision and Political Participation," Sciences Po publications info:hdl:2441/16juu6v6rg8, Sciences Po.
    7. Kopalle Praveen K & Neslin Scott A, 2003. "The Economic Viability of Frequency Reward Programs in a Strategic Competitive Environment," Review of Marketing Science, De Gruyter, vol. 1(1), pages 1-41, August.
    8. Elie Ofek & V. Srinivasan, 2002. "How Much Does the Market Value an Improvement in a Product Attribute?," Marketing Science, INFORMS, pages 398-411.
    9. Vishal Gaur & Dorothée Honhon, 2006. "Assortment Planning and Inventory Decisions Under a Locational Choice Model," Management Science, INFORMS, pages 1528-1543.
    10. Roger Betancourt & David Gautschi, 1996. "An international comparison of the determinants of retail gross margins," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 173-189.
    11. Dominique Olié Lauga & Elie Ofek, 2011. "Product Positioning in a Two-Dimensional Vertical Differentiation Model: The Role of Quality Costs," Marketing Science, INFORMS, pages 903-923.
    12. Roger Betancourt & Margaret Malanoski, 1999. "An Estimable Model of Supermarket Behavior: Prices, Distribution Services and Some Effects of Competition," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 55-73.
    13. Yong Liu & Daniel Putler & Charles Weinberg, 2006. "The welfare and equity implications of competition in television broadcasting: the role of viewer tastes," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 127-140.
    14. Tselekounis, Markos & Maniadakis, Dimitris & Varoutas, Dimitris, 2012. "NGA investments: A departure from the existing cost and demand structure assumptions," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72490, International Telecommunications Society (ITS).
    15. Marks, Ulf G. & Albers, Sönke, 1995. "Experiments in competitive product positioning: An equilibrium analysis," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 364, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    16. repec:eee:proeco:v:191:y:2017:i:c:p:74-84 is not listed on IDEAS
    17. Milind Dawande & Srinagesh Gavirneni & Yinping Mu & Suresh Sethi & Chelliah Sriskandarajah, 2010. "On the Interaction Between Demand Substitution and Production Changeovers," Manufacturing & Service Operations Management, INFORMS, pages 682-691.
    18. Wilfred Amaldoss & Woochoel Shin, 2011. "Competing for Low-End Markets," Marketing Science, INFORMS, pages 776-788.
    19. Rajeev K. Tyagi, 2000. "Sequential Product Positioning Under Differential Costs," Management Science, INFORMS, pages 928-940.

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