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Competitive Strategies when Consumers are Relative Thinkers: Implications for Pricing, Promotions, and Product Choice

Roman Inderst () and Martin Obradovits ()

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: How should firms optimally choose prices and promotional strategies and how should they position their products when consumers are "relative thinkers"? We provide answers in a model that extends the seminal contributions of Varian (1980) and Narasimhan (1988) and derive both managerial implications and implications for empirical researchers with regards to promotional frequency and depth as well as observed product heterogeneity in the market.

Keywords: Relative Thinking; Price Competition; Promotions; Product Choice; Product Heterogeneity; Managerial Implications (search for similar items in EconPapers)
JEL-codes: D21 D43 D91 L11 L13 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020
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