Developing a tool predicting competitive reaction to a price increase
Volik, Ilia (2019)
Volik, Ilia
2019
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201904114865
https://urn.fi/URN:NBN:fi:amk-201904114865
Tiivistelmä
The present study was implemented in order to help the case company to predict a competitive pricing reaction. Predicting the competitive reaction is important as the case company loses market share and may lose profit if competitiors do not follow the company’s price increases.
The study included an analysis of the current approach to competitive reaction, as well as oligopolistic theory and tacit collusion. Interviews with corporate pricing decision makers and analysis of actual market data were carried out in the study.
The outcome of the study was a tool predicting competitive reaction to price increase. The tool includes two parts. The first part is a table with factors found to be making a significant impact on competitive pricing reaction. The second part is a total impact which is a sum of impacts of the significant factors. If the tool’s total impact is above zero then the competitors are likely to follow the price increase of the case company and, consequently, the latter can increase prices. If the tool’s total impact is below zero then the competitors are likely not to follow the price increase of the case company. Thus, the latter should retain from price lifting.
The study included an analysis of the current approach to competitive reaction, as well as oligopolistic theory and tacit collusion. Interviews with corporate pricing decision makers and analysis of actual market data were carried out in the study.
The outcome of the study was a tool predicting competitive reaction to price increase. The tool includes two parts. The first part is a table with factors found to be making a significant impact on competitive pricing reaction. The second part is a total impact which is a sum of impacts of the significant factors. If the tool’s total impact is above zero then the competitors are likely to follow the price increase of the case company and, consequently, the latter can increase prices. If the tool’s total impact is below zero then the competitors are likely not to follow the price increase of the case company. Thus, the latter should retain from price lifting.