Selection of Product Line Qualities and Prices to Signal Competitive Advantage
We investigate a firm's choice of prices and qualities of a product line to signal competitive advantage to potential entrants and to discourage entry. The market consists of customer segments with different valuations for product quality. We demonstrate that a higher quality and a higher price...
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| Veröffentlicht in: | Management science 1994-07, Vol.40 (7), p.824-841 |
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| container_title | Management science |
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| creator | Balachander, Subramanian Srinivasan, Kannan |
| description | We investigate a firm's choice of prices and qualities of a product line to signal competitive advantage to potential entrants and to discourage entry. The market consists of customer segments with different valuations for product quality. We demonstrate that a higher quality and a higher price of each product in the line convey the firm's advantage to potential competition and prevents entry. We discuss implications for optimal product line selection when customers self-select a product from the line.
When product quality change is costly, the superior incumbent continues to select a higher quality and price for each product in the line to credibly substantiate its competitive advantage, though the distortions necessary from the optimal values are lower than before. After informative signalling and deterring entry, the firm retains the higher quality product line. |
| doi_str_mv | 10.1287/mnsc.40.7.824 |
| format | Article |
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When product quality change is costly, the superior incumbent continues to select a higher quality and price for each product in the line to credibly substantiate its competitive advantage, though the distortions necessary from the optimal values are lower than before. After informative signalling and deterring entry, the firm retains the higher quality product line.</description><identifier>ISSN: 0025-1909</identifier><identifier>EISSN: 1526-5501</identifier><identifier>DOI: 10.1287/mnsc.40.7.824</identifier><identifier>CODEN: MNSCDI</identifier><language>eng</language><publisher>Hanover, MD., etc: INFORMS</publisher><subject>Adverse selection ; Capital costs ; Competitive advantage ; Competitive firms ; Cost of entry ; entry deterrence ; Incumbents ; Intuition ; Management science ; Market prices ; Marketing ; marketing strategy ; Monopoly ; pooling equilibrium ; Pricing ; Pricing policies ; Pricing strategies ; product line ; Product lines ; Product orientation ; Product quality ; Production costs ; quality ; separating equilibrium ; Signaling ; signalling ; Studies</subject><ispartof>Management science, 1994-07, Vol.40 (7), p.824-841</ispartof><rights>Copyright 1994 The Institute of Management Sciences</rights><rights>Copyright Institute for Operations Research and the Management Sciences Jul 1994</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c522t-e608142a424f3317406bb1ad5e6621f6c2e39f4acf3126630ddaec853d37dff73</citedby></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/2632915$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://pubsonline.informs.org/doi/full/10.1287/mnsc.40.7.824$$EHTML$$P50$$Ginforms$$H</linktohtml><link.rule.ids>314,780,784,803,3692,4008,27869,27924,27925,58017,58250,62616</link.rule.ids><backlink>$$Uhttp://econpapers.repec.org/article/inmormnsc/v_3a40_3ay_3a1994_3ai_3a7_3ap_3a824-841.htm$$DView record in RePEc$$Hfree_for_read</backlink></links><search><creatorcontrib>Balachander, Subramanian</creatorcontrib><creatorcontrib>Srinivasan, Kannan</creatorcontrib><title>Selection of Product Line Qualities and Prices to Signal Competitive Advantage</title><title>Management science</title><description>We investigate a firm's choice of prices and qualities of a product line to signal competitive advantage to potential entrants and to discourage entry. The market consists of customer segments with different valuations for product quality. We demonstrate that a higher quality and a higher price of each product in the line convey the firm's advantage to potential competition and prevents entry. We discuss implications for optimal product line selection when customers self-select a product from the line.
When product quality change is costly, the superior incumbent continues to select a higher quality and price for each product in the line to credibly substantiate its competitive advantage, though the distortions necessary from the optimal values are lower than before. After informative signalling and deterring entry, the firm retains the higher quality product line.</description><subject>Adverse selection</subject><subject>Capital costs</subject><subject>Competitive advantage</subject><subject>Competitive firms</subject><subject>Cost of entry</subject><subject>entry deterrence</subject><subject>Incumbents</subject><subject>Intuition</subject><subject>Management science</subject><subject>Market prices</subject><subject>Marketing</subject><subject>marketing strategy</subject><subject>Monopoly</subject><subject>pooling equilibrium</subject><subject>Pricing</subject><subject>Pricing policies</subject><subject>Pricing strategies</subject><subject>product line</subject><subject>Product lines</subject><subject>Product orientation</subject><subject>Product quality</subject><subject>Production costs</subject><subject>quality</subject><subject>separating equilibrium</subject><subject>Signaling</subject><subject>signalling</subject><subject>Studies</subject><issn>0025-1909</issn><issn>1526-5501</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>1994</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><sourceid>K30</sourceid><recordid>eNqFkV2L1DAUhosoOO566Z0XRUFv7JivJu3lMqxfDH6weh2y6clMhrapSTrL_vs9u9UVBPHi5QTOk4cXTlE8o2RNWaPeDmOya0HWat0w8aBY0ZrJqq4JfVisCGF1RVvSPi6epHQghKhGyVXx-QJ6sNmHsQyu_BpDN9tcbv0I5bfZ9D57SKUZO1x5i88cygu_G01fbsIwQUbgCOVZdzRjNjs4LR450yd4-mueFD_enX_ffKi2X95_3JxtK1szliuQpKGCGcGE45wqQeTlJTVdDVIy6qRlwFsnjHWcMik56ToDtql5x1XnnOInxavFO8Xwc4aU9eCThb43I4Q5ad5IpbhoEHzxF3gIc8T-STPKKbagDKGX_4Ioa1WDHe5U1ULZGFKK4PQU_WDitaZE3x5A3x5AC6KVxgMg_2nhI0xg72E_DiHekUfNDdLcXGNo2wocHqMwEwYluhFU7_OAsueL7JByiPcyJjlraY3rN8vajw7t6b_VXi_43u_2Vz6C_v1vMAj6P-QN2_C3Gw</recordid><startdate>19940701</startdate><enddate>19940701</enddate><creator>Balachander, Subramanian</creator><creator>Srinivasan, Kannan</creator><general>INFORMS</general><general>Institute of Management Sciences</general><general>Institute for Operations Research and the Management Sciences</general><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>K30</scope><scope>PAAUG</scope><scope>PAWHS</scope><scope>PAWZZ</scope><scope>PAXOH</scope><scope>PBHAV</scope><scope>PBQSW</scope><scope>PBYQZ</scope><scope>PCIWU</scope><scope>PCMID</scope><scope>PCZJX</scope><scope>PDGRG</scope><scope>PDWWI</scope><scope>PETMR</scope><scope>PFVGT</scope><scope>PGXDX</scope><scope>PIHIL</scope><scope>PISVA</scope><scope>PJCTQ</scope><scope>PJTMS</scope><scope>PLCHJ</scope><scope>PMHAD</scope><scope>PNQDJ</scope><scope>POUND</scope><scope>PPLAD</scope><scope>PQAPC</scope><scope>PQCAN</scope><scope>PQCMW</scope><scope>PQEME</scope><scope>PQHKH</scope><scope>PQMID</scope><scope>PQNCT</scope><scope>PQNET</scope><scope>PQSCT</scope><scope>PQSET</scope><scope>PSVJG</scope><scope>PVMQY</scope><scope>PZGFC</scope><scope>SAAPM</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>19940701</creationdate><title>Selection of Product Line Qualities and Prices to Signal Competitive Advantage</title><author>Balachander, Subramanian ; Srinivasan, Kannan</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c522t-e608142a424f3317406bb1ad5e6621f6c2e39f4acf3126630ddaec853d37dff73</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>1994</creationdate><topic>Adverse selection</topic><topic>Capital costs</topic><topic>Competitive advantage</topic><topic>Competitive firms</topic><topic>Cost of entry</topic><topic>entry deterrence</topic><topic>Incumbents</topic><topic>Intuition</topic><topic>Management science</topic><topic>Market prices</topic><topic>Marketing</topic><topic>marketing strategy</topic><topic>Monopoly</topic><topic>pooling equilibrium</topic><topic>Pricing</topic><topic>Pricing policies</topic><topic>Pricing strategies</topic><topic>product line</topic><topic>Product lines</topic><topic>Product orientation</topic><topic>Product quality</topic><topic>Production costs</topic><topic>quality</topic><topic>separating equilibrium</topic><topic>Signaling</topic><topic>signalling</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Balachander, Subramanian</creatorcontrib><creatorcontrib>Srinivasan, Kannan</creatorcontrib><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>Periodicals Index Online</collection><collection>Primary Sources Access—Foundation Edition (Plan E) - 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The market consists of customer segments with different valuations for product quality. We demonstrate that a higher quality and a higher price of each product in the line convey the firm's advantage to potential competition and prevents entry. We discuss implications for optimal product line selection when customers self-select a product from the line.
When product quality change is costly, the superior incumbent continues to select a higher quality and price for each product in the line to credibly substantiate its competitive advantage, though the distortions necessary from the optimal values are lower than before. After informative signalling and deterring entry, the firm retains the higher quality product line.</abstract><cop>Hanover, MD., etc</cop><pub>INFORMS</pub><doi>10.1287/mnsc.40.7.824</doi><tpages>18</tpages></addata></record> |
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| ispartof | Management science, 1994-07, Vol.40 (7), p.824-841 |
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| language | eng |
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| source | Informs; RePEc; Periodicals Index Online; EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing |
| subjects | Adverse selection Capital costs Competitive advantage Competitive firms Cost of entry entry deterrence Incumbents Intuition Management science Market prices Marketing marketing strategy Monopoly pooling equilibrium Pricing Pricing policies Pricing strategies product line Product lines Product orientation Product quality Production costs quality separating equilibrium Signaling signalling Studies |
| title | Selection of Product Line Qualities and Prices to Signal Competitive Advantage |
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