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The Effects of Imbalanced Competition on Demonstration Strategies

Amir Heiman and Chezy Ofir

No 93131, Discussion Papers from Hebrew University of Jerusalem, Department of Agricultural Economics and Management

Abstract: This paper analyzes the effect of competition on product demonstration decisions. Pre-purchase product demonstration enables marketers to differentiate products that are ex-post differentiated but are judged according to perceived fit, rather than actual fit, due to pre-purchase consumer uncertainty. Imbalanced competition accompanied by fit uncertainty motivates the follower to offer demonstrations to avoid a price war. This paper explores the conditions that lead the leader to retaliate. In addition to effects on quantity, competition may increase the quality of demonstrations offered by the leader. We analyze a business case, showing that competition may increase the demonstration intensity and that the leading manufacturer’s response to changes in competition is stronger than the responses of the followers. Our research has the potential to aid mangers in formulating demonstration strategies and in responding to competitors’ demonstration efforts.

Keywords: Political Economy; Production Economics (search for similar items in EconPapers)
Pages: 50
Date: 2010
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ags:huaedp:93131

DOI: 10.22004/ag.econ.93131

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