Empirical Analysis of Competitive Product Line Pricing Decisions: Lead, Follow, or Move Together?

JOURNAL OF BUSINESS, Vol. 69, No. 4, October 1996

Posted: 4 May 1998  

Vrinda Kadiyali

Cornell University - Samuel Curtis Johnson Graduate School of Management

Naufel J. Vilcassim

London Business School

Pradeep K. Chintagunta

University of Chicago

Abstract

Researchers have recently developed models for determining which market conduct best describes observed data. We apply these techniques from the "new empirical industrial organization" literature to the competitive product line pricing decision, where a firm strategically prices its brands when determining the profit-maximizing conduct in the market. Demand, cost, and market structure are estimated endogenously. Empirical results from analyzing price competition in the laundry detergent market between Procter and Gamble selling Tide and EraPlus, and Lever Brothers offering Wisk and Surf, indicate that each firm positions its strong brand as a Stackelberg leader, with the rival's minor brand being the follower.

JEL Classification: L11, L13, L81

Suggested Citation

Kadiyali, Vrinda and Vilcassim, Naufel J. and Chintagunta, Pradeep K., Empirical Analysis of Competitive Product Line Pricing Decisions: Lead, Follow, or Move Together?. JOURNAL OF BUSINESS, Vol. 69, No. 4, October 1996. Available at SSRN: https://ssrn.com/abstract=4100

Vrinda Kadiyali

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-1985 (Phone)
607-254-4590 (Fax)

Naufel J. Vilcassim

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Pradeep K. Chintagunta (Contact Author)

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

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