Abstract
This research focuses on how price changes influence the observed pattern of brand competition. The paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition. A price-tier model is proposed to operationalize the theory and to allow predictive testing. The price-tier model is estimated on 28 brands across four product categories. The results show a specific asymmetric pattern of price competition. Higher-price, higher quality brands steal share from other brands in the same price-quality tier, as well as from brands in the tier below. However, lower-price, lower-quality brands take sales from their own tier and the tier below brands, but do not steal significant share from the tiers above. The results are consistent with a bimodal preference distribution, with the regular price indifference point being located toward the lower-quality end of the preference distribution for the categories analyzed.
Keywords
Competition (biology)PreferenceOperationalizationQuality (philosophy)Market shareDistribution (mathematics)Product (mathematics)EconomicsMicroeconomicsBrand preferenceOligopolyPoint (geometry)EconometricsBusinessMarketingMathematicsBrand awarenessCournot competition
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Publication Info
- Year
- 1989
- Type
- article
- Volume
- 8
- Issue
- 4
- Pages
- 291-309
- Citations
- 671
- Access
- Closed
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Cite This
Robert C. Blattberg,
Kenneth J. Wisniewski
(1989).
Price-Induced Patterns of Competition.
Marketing Science
, 8
(4)
, 291-309.
https://doi.org/10.1287/mksc.8.4.291
Identifiers
- DOI
- 10.1287/mksc.8.4.291