EconPapers    
Economics at your fingertips  
 

Turf Wars: Product Line Strategies in Competitive Markets

Yogesh V. Joshi (), David J. Reibstein () and Z. John Zhang ()
Additional contact information
Yogesh V. Joshi: Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742
David J. Reibstein: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Z. John Zhang: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Marketing Science, 2016, vol. 35, issue 1, 128-141

Abstract: In this paper we study product line scope and pricing decisions in a horizontally differentiated duopoly. Past research has shown that a firm may offer a broader product line to attract higher demand or charge a higher price (or both), and benefit at the expense of its competitor. We show that such outcomes may be reversed, especially when consumers have relatively high valuation and low heterogeneity in their preferences for the line extension. We find that an equilibrium exists such that only one firm prefers to expand scope but profits may be higher for both firms, even in the absence of market size expansion. This is because a broader scope permits that firm to effectively price discriminate by raising prices for its core customers. The competitor optimally responds by lowering prices to gain share and earn a higher profit. Thus, higher prices for the firm expanding its product line translate into higher demand for the competing firm, thus increasing profit for both. We show that our results hold when firms deploy generic, offensive or defensive strategies during product line expansion.

Keywords: product line strategy; differentiation; multi-product competition; game theory (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.2015.0945 (application/pdf)

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:inm:ormksc:v:35:y:2016:i:1:p:128-141

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().

 
Page updated 2025-03-19
Handle: RePEc:inm:ormksc:v:35:y:2016:i:1:p:128-141