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The Effects of Imbalanced Competition on Demonstration Strategies

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  • Heiman, Amir
  • Ofir, Chezy

Abstract

This paper analyzes the effect of competition on product demonstration decisions. Pre-purchase product demonstration enables marketers to differentiate products that are ex-post differentiated but are judged according to perceived fit, rather than actual fit, due to pre-purchase consumer uncertainty. Imbalanced competition accompanied by fit uncertainty motivates the follower to offer demonstrations to avoid a price war. This paper explores the conditions that lead the leader to retaliate. In addition to effects on quantity, competition may increase the quality of demonstrations offered by the leader. We analyze a business case, showing that competition may increase the demonstration intensity and that the leading manufacturer’s response to changes in competition is stronger than the responses of the followers. Our research has the potential to aid mangers in formulating demonstration strategies and in responding to competitors’ demonstration efforts.

Suggested Citation

  • Heiman, Amir & Ofir, Chezy, 2010. "The Effects of Imbalanced Competition on Demonstration Strategies," Discussion Papers 93131, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  • Handle: RePEc:ags:huaedp:93131
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    File URL: http://purl.umn.edu/93131
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    Cited by:

    1. Heiman, Amir & Just, David R. & McWilliams, Bruce P. & Zilberman, David, 2015. "A prospect theory approach to assessing changes in parameters of insurance contracts with an application to money-back guarantees," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 105-117.
    2. repec:eee:ijrema:v:33:y:2016:i:4:p:881-895 is not listed on IDEAS

    More about this item

    Keywords

    Imbalanced competition; product demonstration; differentiation; test-drive; price war; Political Economy; Production Economics;

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