How to protect your premium product from low-price competitors: Price, quality, or portfolio adjustment?

Peter-J. Jost

International Journal of Research in Marketing, 2014, vol. 31, issue 3, 253-265

Abstract: In a game-theoretic framework, I analyze how a brand manufacturer can thwart new entrants into its market. Three strategic options are considered, a price adjustment of the premium product, a quality adjustment of the premium product and a portfolio adjustment of adding a fighter brand. In a basic setup, I show that the incumbent's best response to entry is to choose a portfolio adjustment. If, however, the incumbent is uncertain about whether the rival firm will enter the market, a price adjustment of the premium product might be the better alternative if launching the fighter brand is associated with costs. Moreover, if technological progress improves the efficiency of product development, a combined quality and portfolio adjustment might be the best alternative for the incumbent.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijrema:v:31:y:2014:i:3:p:253-265

DOI: 10.1016/j.ijresmar.2013.11.001

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