IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/7685.html
   My bibliography  Save this paper

Competitive Pricing Analysis in Mature & Evolving Markets A Time Series Approach

Author

Listed:
  • Joseph, Joy

Abstract

Competitive behavior between players in a mature market can have a different structure than those in growing markets. Pricing component of the marketing mix is less relied upon to expand market share in growing markets, while there is a greater reliance upon product differentiation and building stronger brand equity. On the other hand, in mature markets, there is usually very little scope for product differentiation, so there is a greater reliance on pricing for competitive gains. Since market share expansion in a mature market comes directly from competitive sales declines, pricing strategy changes in one brand leads to a fairly instantaneous reaction from other brands in the category and retail prices in general reflect the equilibrium condition of consumption. This paper applies methods from Time Series Econometrics to identify nonstationary behavior and long-run equilibrium of retail prices of brands in mature and evolving markets. The results indicate that long-run equilibrium in prices may be an outcome of the maturity of markets, as the persistence of the shocks in the prices do not result in the persistence in shocks to sales. The cointegrating condition created by the intense price competition imposes a stationarity restriction on sales, hence eliminating the possibility of any long term pricing strategy and pricing becomes tactical.

Suggested Citation

  • Joseph, Joy, 2005. "Competitive Pricing Analysis in Mature & Evolving Markets A Time Series Approach," MPRA Paper 7685, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7685
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/7685/1/MPRA_paper_7685.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. G. Dekimpe, Marnik & Hanssens, Dominique M. & Silva-Risso, Jorge M., 1998. "Long-run effects of price promotions in scanner markets," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 269-291, November.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
    4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    5. Plosser, Charles I. & Schwert, G. William, 1977. "Estimation of a non-invertible moving average process : The case of overdifferencing," Journal of Econometrics, Elsevier, vol. 6(2), pages 199-224, September.
    6. Marnik G. Dekimpe & Dominique M. Hanssens, 1995. "Empirical Generalizations About Market Evolution and Stationarity," Marketing Science, INFORMS, vol. 14(3_supplem), pages 109-121.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Competitive; Pricing; Dynamics; Cointegration; Unit Roots; Retail;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:7685. 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: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.