IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Note—Competitive Price and Positioning Strategies

  • John R. Hauser

    (Harvard University)

Brand positioning and brand pricing are important strategic decisions for marketing managers. Such decisions are interrelated and depend upon competitive brand positions and prices. However, any unilateral decisions may encourage repositioning and price adjustment by competitors thus leading to either new market equilibria or a price/positioning “war.” This paper examines such price and positioning decisions in a competitive environment by extending the ‘Defender' consumer model to more complex equilibria. We assume that the brands are already in the market and that positions are “sticky” in the sense that brands cannot leapfrog one another. Among the insights for such incumbent brands are: • if prices are symmetric and held constant, firms seek to reposition toward the center of the market, • but price advantages by central firms can mediate that central tendency such that an equilibrium exists with positive profits; • if brand positions are held constant, the Nash equilibria for prices exist and are unique, and • category profits, the sum of brand profits, are maximized for maximum brand differentiation; • for two and three brand markets the (subgame perfect Nash) equilibrium, where positioning decisions are made with foresight on the price equilibria, causes firms to unilaterally seek maximum brand differentiation; but • for four or more brands greater foresight and/or cooperation appears necessary to reach the point of maximum brand differentiation. These results apply where the Defender consumer model is an exact description of consumer response and where the competitive reaction assumptions hold. In any empirical situation such forces might be softened resulting in differentiated, but not maximally differentiated, brands.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dx.doi.org/10.1287/mksc.7.1.76
Download Restriction: no

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 7 (1988)
Issue (Month): 1 ()
Pages: 76-91

as
in new window

Handle: RePEc:inm:ormksc:v:7:y:1988:i:1:p:76-91
Contact details of provider: Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
Phone: +1-443-757-3500
Fax: 443-757-3515
Web page: http://www.informs.org/
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:7:y:1988:i:1:p:76-91. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.