Pricing strategies in a dynamic duopoly: a differential game model
Article Abstract:
The dynamic pricing policies for firms in duopoly markets are examined using the framework of the logit model as well as a process of brand preference accumulation. Findings reveal that, in steady-state equilibrium, the brand with the higher preference level imposes a higher price, given that equal marginal costs for brands are present. Moreover, all other things being equal, the steady-state price levels increase if the price sensitivity decreases and the carry-over effect of preferences in the market rises. Results also show that, in the face of equal preference levels for each of the two brands in the two cases, myopic price levels are greater than the steady-state dynamic prices. The analysis is extended to cover the impact of consumer heterogeneity in their price sensitivities. Empirical results are discussed.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1996
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Investigating dynamic multifirm market interactions in price and advertising
Article Abstract:
Accurately determining competitive structures of product markets, including the competitive interactions withing rival firms, is important for the creation of effective marketing strategies. A study was therefore conducted to analyze competitive interactions between three players within the market for a particular personal care product. It focused on the three major brands constituting a specific sub-category within this market. Price and advertising competition among the three firms was evaluated and each rival's production and advertising cost functions were modeled. Empirical results elucidate the nature of market structure and conduct above and beyond those that are possible using previous approaches such as the reaction function.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1999
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An empirical investigation of advertising strategies in a dynamic duopoly
Article Abstract:
A single framework was developed for both the calculation of the market response function to advertising spending and the identification of the equilibrium levels of such expenditures in a duopolistic environment. The theoretical results obtained from the formulation of the model were empirically applied to examine the open- and close-loop advertising policies adopted by two competitors, Coke and Pepsi, from 1968 to 1981. Results from this empirical application offer some insights into the nature of advertising competition within the soft drink industry during that fiercely competitive period. A discussion of the study's results, the model's limitations and recommendations for future research is presented.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1992
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