Competitive strategies: a cognitive choice model

Donald P Ballou and John S Pipkin

Omega, 1980, vol. 8, issue 1, 53-62

Abstract: A theory of competition between firms in heterogeneous markets is formulated using a psychological model of choice, the heteroscedastic form of the Thurstone random strength model. Market shares are defined in terms of random variables which portray individual variation in perceived utility. The analysis focuses on the relationship between market shares and utility variances. Besides the general theory of competition two special cases are analyzed, each of which can be identified without precise knowledge of the utility parameters. The conclusions tend to support conventional marketing wisdom but emphasize that the degree of dominance of the market leader is a significant factor in its competitive strategy. Short and long-run analyses of the model are presented, and it is shown that the best policy for a particular firm in the short run remains optimal in the presence of competitors' reactions, but it may no longer be effective. The paper concludes with some comments on statistical implementation.

Date: 1980
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/0305-0483(80)90041-9
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:8:y:1980:i:1:p:53-62

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Omega is currently edited by B. Lev

More articles in Omega from Elsevier
Bibliographic data for series maintained by Catherine Liu ().