Competitive Promotional Strategies
This article analyzes the equilibrium-pricing strategies of brands engaged in a pricing game. Each brand has a monopoly market (loyal consumers) and competes with others in a common market called brand switchers. In the case of a duopoly, it is shown that the behavior of the brand switchers characterizes the equilibrium behavior of the duopolists. This article focuses on two key comparative statics: namely , the depth of discounts away from a "regular" high price and the probability of giving a deal or the frequency of deals. How these properties vary with the size of the loyal markets and the behavior of the brand switching population is discussed. Copyright 1988 by the University of Chicago.
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