Product Positioning Under Price Competition
Management Science Vol. 36 No. 2, pp. 175-199, 1990
26 Pages Posted: 2 Jun 2016
Date Written: February 1990
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
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