Duopolistic positioning and pricing competition with variety‐seeking and strategic consumers

Weixin SHANG, Shilu TONG, Yunjie WANG*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

This paper examines a duopolistic market in which two firms compete on their positioning and pricing decisions. Consumers may be variety-seeking or non-variety-seeking, and strategic or myopic, in their repeated purchases. The competing firms first determine the positioning and then the prices in two selling periods under either price commitment or dynamic pricing. Contrary to the conventional wisdom that variety-seeking consumers are less profitable consumers, we find that firms may benefit from more variety-seeking consumers under either pricing scheme when some of these consumers are myopic. Strategic consumer behavior always intensifies the competition and hurts the firms. Under each pricing scheme, either myopic variety-seeking consumers or non-variety-seeking consumers can be the most profitable consumer group, while strategic variety-seeking consumers are always the least preferred consumer group. Compared with dynamic pricing, price commitment softens horizontal competition and increases profits. When the firms can choose freely between price commitment and dynamic pricing before they engage in pricing competition, they may adopt asymmetric pricing schemes in equilibrium.
Original languageEnglish
Number of pages14
JournalNaval Research Logistics (NRL)
DOIs
Publication statusE-pub ahead of print - 31 Jul 2021

Bibliographical note

Funding Information:
Hong Kong Research Grants Council, 13501617; National Natural Science Foundation of China, 71671157; 71901209; Shenzhen Key Laboratory of IoT Intelligent Systems and Wireless Network Technology, ZDSYS20170725140921348 Funding information

Funding Information:
The authors sincerely thank the editor‐in‐chief, the associate editor, and two anonymous reviewers for their constructive comments and suggestions that help improve the quality of the study. Weixin Shang was supported in part by Hong Kong Research Grants Council (GRF Project LU 13501617). Shilu Tong was supported by the National Natural Science Foundation of China (Grant 71671157) and Shenzhen Key Laboratory of IoT Intelligent Systems and Wireless Network Technology (Grant No. ZDSYS20170725140921348). Yunjie Wang, the corresponding author, was supported by National Natural Science Foundation of China (Grant 71901209).

Publisher Copyright:
© 2021 Wiley Periodicals LLC.

Keywords

  • horizontal competition
  • positioning
  • strategic consumers
  • variety seeking

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