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Product Positioning Under Price Competition

Author

Listed:
  • 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)

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.

Suggested Citation

  • S. Chan Choi & Wayne S. Desarbo & Patrick T. Harker, 1990. "Product Positioning Under Price Competition," Management Science, INFORMS, vol. 36(2), pages 175-199, February.
    • Handle: RePEc:inm:ormnsc:v:36:y:1990:i:2:p:175-199
    DOI: 10.1287/mnsc.36.2.175
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