A two stage model for product and price competition in multi-segmented market

This paper presents a model of competitive positioning and pricing of new products in a multi-segmented market. The segments in the market are located on a multi-dimensional discrete attribute space with fixed demands. Firms launch products sequentially on the attribute space, incurring fixed and variable costs, and then decide on their product prices. Each firm acts to maximize its profit. Market share of a firm is determined by the position and price of its product. We provide sufficient conditions for the existence and uniqueness of Nash equilibrium. Another equilibrium concept is introduced and related to the Nash equilibrium. A heuristic algorithm based on genetic algorithms is designed to obtain the Nash equilibrium.