Product positioning under price competition

Product positioning under price competition

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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: , ,
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 inequalitites. A small example concerning analgesics is used to illustrate this methodology.

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