Article ID: | iaor1990467 |
Country: | United States |
Volume: | 36 |
Issue: | 2 |
Start Page Number: | 1 |
End Page Number: | 7 |
Publication Date: | Feb 1990 |
Journal: | Management Science |
Authors: | Desarbo Wayne S., Harker Patrick T., Choi S. Chan |
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 inequalitites. A small example concerning analgesics is used to illustrate this methodology.