Pricing in Innovation Diffusion among Competitors
Downloads
Pricing is analyzed with a system dynamics approach in the context of a dynamic competition among two competitors, one of them offers a product that appears first in the market (the leader), intended to be an innovation, the other (the follower), offers a similar product but enters into the market with a certain lag; price sensitivity, brand equity, lag’s length, quality of the products and consumers response are considered. The leader´s strategy stands on price and revenue performance where else the follower´s on market share. The dynamics is modeled, simulations are made and conclusions are driven. Simulated experiments are used to compute dynamic price elasticity and the hypothesis that the absolute value of price elasticity increases with time is questioned and different shapes reported from empirical data are confirmed associated to pricing strategies. The hypothesis that price reduction increases market share and profitability is also analyzed finding scenarios where it is confirmed and refuted according to price sensitivity of the market.
Bass, F. M. &. B. A. V., 1982. A note on optimal strategic pricing of technological innovations. Marketing Science, 1(4), pp. 371-378.
Bass, F. M., 1969. A new product growth model for consumer durables. Management Science, Volume 15, pp. 215-227.
Buzzel, R. D. G. B. &. S. R., 1975. Market share-a key to profitability. Harvard Business Review, Volume 53, pp. 97-106.
Conner, K. R., 1995. Obtaining strategic advantage from being imitated: When can encouraging "Clones" pay?. Management Science, Volume 41, pp. 209-225.
Forrester, J. W., March 1968. Industrial Dynamics After the First Decade. Management Science, 14(7), pp. 398-415.
Groessler, A. L. T. S. M. &. W. H., 2008. Analyzing price and product strategies with comprehensive system dynamics model-A case study from the capital goods industry. Journal of Business Research, Volume 11, pp. 1136-1142.
Gupta, M. C. &. D. B. C. A., 2007. Optimal pricing and advertising strategy for introducing a new business product with threat of competitive entry. Industrial Marketing Management, Volume 36, pp. 540-548.
Krishnan, T. V. B. F. M. &. J. D. C., 1999. Optimal pricing strategy for new products. Management Science, Volume 45, pp. 1650-1663.
Mead, N. &. I. T., 2006. Modelling and forecasting the diffusion of innovation-A 25 year review.. International Journal of Forecasting, Volume 22, p. 519– 545.
Nagle, T. T. &. H. R. K., 2002. The Strategy and Tactics of Pricing.. Upper Saddle River, New Jersey: Pearson Education, Inc..
Otto, P., 2008. A system dynamics model as a decision aid in evaluating and communicating complex market entry strategies. Journal of Business Research, , 61(11 ), pp. 1173-1181.
Parker, P., 1992(b). Pricing strategies in markets with dynamic elasticities. Marketing Letters, 3(3), pp. 227-237..
Parker, P., 1992. Price elasticity dynamics over the adoption life cycle.. Journal of marketing research, Volume XXIX, pp. 358-367.
Parker, P. M. & Gatignon, H., 1996. Order of Entry, Trial Diffusion, and Elasticity Dynamics: An Empirical Case. Marketting Letters, 7(1), pp. 95-109.
Robertson, T. S., 1971. Innovative behavior and communication.. s.l.:Holt, Rinehart and Winston, Inc..
Rogers, E., 2003. Diffusion of innovations. 5th Ed. ed. New York : Free Press.
Simon, H., 1979. Dynamics of price elasticity and brand life cycles: An empirical study.. Journal of Marketing Research, Volume 16, pp. 439-452.
Sterman, J. D., 2000. Business Dynamics: systems thinking and modeling for a complex world. s.l.:McGraw-Hill.
Wang, W. F. P. &. T. C., 2003. Innovation diffusion model in patch environment. Applied Mathematics and Computation, Volume 134, pp. 51-67.
Wang, W. F. P. L. S. &. M. G., 2006. Mathematical models of innovation diffusion with stage structure. Applied Mathematical Modelling, Volume 30, pp. 129-146.
Yu, Y. W. W. &. Z. Y., 2003. An innovation diffusion model for three competitive products. An international Journal, Volume 46, pp. 1473-1481.
All Content should be original and unpublished.
