This paper examines optimal product positioning strategies of asymmetric firms in the context of retail outlet locations in the fast food industry. The relationships between profits and product differentiation reveal that both McDonald's and Burger King are better off avoiding close competition if the market area is large enough. However, in small market areas, McDonald's would prefer to be located together with Burger King rather than have the two outlets be only a slight distance apart. In contrast, Burger King's profits always increase with greater differentiation. Offsetting these incentives is the desirability of locating centrally to appeal to the most customers. The equilibrium depends on the market's size. In small markets, McDonald's locates near the center of the market, and Burger King locates to the side of the market. In larger markets, McDonald's and Burger King choose locations on opposite sides of the market, although McDonald's locates closer to the optimal central location than Burger King. I also show that the role of price competition on product positioning is fundamentally different under asymmetric competition than under symmetric competition. Price competition unambiguously induces symmetric firms toward differentiation. In contrast, with asymmetric firms, price competition shifts Burger King's incentives toward locating closer to McDonald's, even while price competition increases McDonald's desire for differentiation. As a result, equilibrium locations with asymmetric firms are approximately the same, regardless of whether prices adjust with location.product positioning, pricing research, geographic competition, fast food
Marketing science models typically assume that responses of one entity (firm or consumer) are unrelated to responses of other entities. In contrast, models constructed using tools from spatial statistics allow for cross-sectional and longitudinal correlations among responses to be explicitly modeled by locating entities on some type of map. By generalizing the notion of a map to include demographic and psychometric representations, spatial models can capture a variety of effects (spatial lags, spatial autocorrelation, and spatial drift) that impact firm or consumer decision behavior. Marketing science applications of spatial models and important research opportunities are discussed. Copyright Springer Science + Business Media, Inc. 2005
The introduction of memory imperfections into models of economic decision making creates a natural role for anticipatory emotions. Their combination has striking behavioural implications. The paper first shows that agents can rationally select apparently dominated strategies. We consider Newcomb's Paradox and the Prisoners' Dilemma. We provide a resolution for Newcomb's Paradox and argue it requires the decision maker to ascribe only a tiny weight to anticipatory emotions. For some ranges of parameters, it is possible to obtain cooperation in the Prisoners' Dilemma with probability arbitrarily close to unity. The second half of the paper provides a theory of reminders. Copyright 2005 Royal Economic Society.
We combine COVID-19 case data with mobility data to estimate a modified susceptible-infected-recovered (SIR) model in the United States. In contrast to a standard SIR model, we find that the incidence of COVID-19 spread is concave in the number of infectious individuals, as would be expected if people have inter-related social networks. This concave shape has a significant impact on forecasted COVID-19 cases. In particular, our model forecasts that the number of COVID-19 cases would only have an exponential growth for a brief period at the beginning of the contagion event or right after a reopening, but would quickly settle into a prolonged period of time with stable, slightly declining levels of disease spread. This pattern is consistent with observed levels of COVID-19 cases in the US, but inconsistent with standard SIR modeling. We forecast rates of new cases for COVID-19 under different social distancing norms and find that if social distancing is eliminated there will be a massive increase in the cases of COVID-19.
We study behavior-based pricing (BBP) in a vertically differentiated model. Vertical differentiation is innately asymmetric because all customers prefer the higher-quality product when prices are equal. This asymmetry causes BBP to have different properties than symmetric horizontally differentiated models. We highlight two dimensions that affect the analysis: the role of quality-adjusted cost differences between the firms and the role of consumer discounting relative to firm discounting. In the second period, consistent with the prior literature, we find that there are conditions based on market shares and quality-adjusted costs under which either the low-quality firm or the high-quality firm—but not both—will reward its current customers with lower prices than it charges to new customers. We then consider whether these conditions can arise in a two-period equilibrium. We find that if consumers sufficiently discount the future periods, then firms at enough of a competitive disadvantage will reward their customers: i.e., the low-quality firm will reward its current customers if the quality-adjusted cost differential between the two firms is small, while the high-quality firm will reward its current customers if this cost differential is large. Conversely, we find that if consumers do not discount the future very much, then the firm at a competitive disadvantage (i.e., a low-quality firm competing against a low-cost high-quality firm, or a high-quality firm that has very high costs) can earn greater profits with BBP than without BBP, although there are cases where both firms may benefit from BBP. This paper was accepted by J. Miguel Villas-Boas, marketing.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.