Product Positioning Under Price Competition

S. Chan Choi, Wayne S. Desarbo and Patrick T. Harker
Additional contact information
S. Chan Choi: Department of Marketing and Quantitative Studies, San Jose State University, San Jose, California 95192-0069
Wayne S. Desarbo: Marketing and Statistics Departments, University of Michigan, Ann Arbor, Michigan 48109-1234
Patrick T. Harker: Decision Sciences Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6366

Management Science, 1990, vol. 36, issue 2, 175-199

Abstract: This paper presents a consumer-based methodology for new product pricing and positioning in the face of price competition. The price competition is modelled as a Nash equilibrium for which two complementary approaches are employed: an analytical approach of duopoly provides qualitative insights into the competitive behavior, and a numerical approach of general oligopoly provides quantitative solutions under a wide variety of market scenarios. The optimal product positioning is formulated as a Stackelberg-Nash (leader-followers) equilibrium which can be solved numerically using recent advances in the field of variational inequalities. A small example concerning analgesics is used to illustrate this methodology.

Keywords: marketing: competitive strategy; product policy; games; noncooperative; programming; variational inequalities (search for similar items in EconPapers)
Date: 1990
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:36:y:1990:i:2:p:175-199

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