Product Positioning Under Price Competition

Management Science Vol. 36 No. 2, pp. 175-199, 1990

26 Pages Posted: 2 Jun 2016

See all articles by S Chan Choi

S Chan Choi

Rutgers Business School

Wayne S. DeSarbo

Pennsylvania State University

Patrick T. Harker

University of Pennsylvania - Operations & Information Management Department

Date Written: February 1990

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

Suggested Citation

Choi, S Chan and DeSarbo, Wayne S. and Harker, Patrick T., Product Positioning Under Price Competition (February 1990). Management Science Vol. 36 No. 2, pp. 175-199, 1990, Available at SSRN: https://ssrn.com/abstract=2787296

S Chan Choi

Rutgers Business School ( email )

100 Rockafeller Road
Piscataway, NJ 08854
United States

HOME PAGE: http://www.business.rutgers.edu/faculty-research/directory/choi-chan

Wayne S. DeSarbo (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Patrick T. Harker

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States
215-898-4715 (Phone)
215-573-2065 (Fax)

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