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Optimal Defensive Strategies under Varying Consumer Distributional Patterns and Market Maturity

  • Ulrike Schuster

    (Vienna University of Economics and Business Administration, Austria)

  • J?rgen W?ckl

    (Vienna University of Economics and Business Administration, Austria)

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    In this paper we describe a simulation approach to explore optimal defensive strategies concerning an entrant situation in an artificial consumer market. There are two questions of interest concerning the adaptation of the strategy to obtain maximal profits¡Xthe effects of (1) varying heterogeneity of the considered consumer aspiration points and (2) the maturity of the market at the time of entry. The resulting optimal price-budget combinations remain stable up to a certain degree of heterogeneity. Then a threshold is reached beyond which further disaggregating the market leads to boundary solutions. The entrant threshold seems to be slightly lower than the incumbent threshold. In the case of very late entry a boundary solution seems to be optimal for the entrant in the sense of minimizing losses.

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    Article provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.

    Volume (Year): 1 (2005)
    Issue (Month): 2 (July)
    Pages: 187-206

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    Handle: RePEc:jec:journl:v:1:y:2005:i:2:p:187-206
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    1. Gregory S. Carpenter & Kent Nakamoto, 1990. "Competitive Strategies for Late Entry into a Market with a Dominant Brand," Management Science, INFORMS, vol. 36(10), pages 1268-1278, October.
    2. William T. Robinson, 1988. "Marketing Mix Reactions to Entry," Marketing Science, INFORMS, vol. 7(4), pages 368-385.
    3. John R. Hauser & Steven M. Shugan, 2008. "Defensive Marketing Strategies," Marketing Science, INFORMS, vol. 27(1), pages 88-110, 01-02.
    4. Asim Ansari & Nicholas Economides & Avijit Ghosh, 1994. "Competitive Positioning in Markets with Nonuniform Preferences," Marketing Science, INFORMS, vol. 13(3), pages 248-273.
    5. K. Ravi Kumar & D. Sudharshan, 1988. "Defensive Marketing Strategies: An Equilibrium Analysis Based on Decoupled Response Function Models," Management Science, INFORMS, vol. 34(7), pages 805-815, July.
    6. Suman Basuroy & Dung Nguyen, 1998. "Multinomial Logit Market Share Models: Equilibrium Characteristics and Strategic Implications," Management Science, INFORMS, vol. 44(10), pages 1396-1408, October.
    7. Thomas S. Gruca & K. Ravi Kumar & D. Sudharshan, 1992. "An Equilibrium Analysis of Defensive Response to Entry Using a Coupled Response Function Model," Marketing Science, INFORMS, vol. 11(4), pages 348-358.
    8. Hauser, John R., 1987. "Existence and uniqueness of price equilibria in Defender," Working papers 1878-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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