Competitive Pricing With Dynamic Asymmetric Price Effects
- Topics:
- Competitive Pricing
- Tags:
- Competitive Pricing,
- Marketing,
- Marketing Research,
- Price,
- Pricing,
- Retail,
- University Of Western Ontario
- Source:
- University of Western Ontario
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Overview: We model the temporal pricing strategies for two firms with asymmetric costs and differing market power (i.e. big-box retailer versus smaller local merchant). A firm's demand is a function of its price, a reference price and its competitor's price. Price effects may be asymmetric, i.e. consumers respond differently if they perceive a good to be over-priced versus under-priced. We derive analytical results for optimal prices. We show through a series of numerical examples under what settings firms choose various pricing strategies as well as profit implications for firms with differing costs.
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Format: PDF | Size: 177KB | Date: Jun 2005 | Pages: 17
