Erschienen in:Information Systems Working Papers Series, Vol. , pp. -, 2005
Umfang:
1 Online-Ressource (42 p)
Sprache:
Englisch
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 2005 erstellt
Beschreibung:
The extant literature on price promotions typically assumes thatconsumers loyal to a brand never switch to a competing brand, withShilony (1977) and Raju et al (1990) being exceptions. Extendingthe Narasimhan (1988) model, we allow loyal consumers to hold finitebrand loyalty. Our unique equilibrium splits into three types, dependingupon configurations of consumer reservation utility, brand strengthand switcher population. The type of equilibrium for high brand loyaltycorresponds to the one in Narasimhan (1988). The remainingtwo types for intermediate and low brand loyalty demonstrate strikinglydifferent properties. First, the strong brand has a higher pricerange and a higher regular price. Second, the strong brand has ahigher (lower) average promotional depth than the weak brand whenthe switcher population is small (large). Third, both brands promoteequally frequently when brand loyalty is relatively low. Therefore, thisanalysis hopefully provides a more complete picture about firmsacirc; promotionaldecisions for all possible levels of brand loyalty and switcherpupulation