Spatial mapping of price competition using logit-type market share models and store-level scanner-data

• Published in: The Journal of the Operational Research Society 2009-01, Vol.60 (1), p.52-62
• Main Authors: González-Benito, Ó, Martínez-Ruiz, M P, Molla-Descals, A
• Format: Article
• Language: English
• Subjects: Analysis; Applied sciences; Asymmetry; Awards & honors; Brands; Brandy; Business and Management; Case-Oriented Paper; Case-Oriented Papers; Competition; competitive maps; Consumer behavior; Consumers; Coordinate systems; cross-elasticity; Economic competition; Elasticity of demand; Exact sciences and technology; Financial market structures; Firm modelling; Management; Market competition; Market prices; Market share; Market shares; market structure; Marketing; Operational research and scientific management; Operational research. Management science; Operations Research/Decision Theory; Price elasticity; price rivalry; Prices; Research methodology; Scanners; store-level scanner data; Studies
• ISSN: 0160-5682; 1476-9360
• DOI: 10.1057/palgrave.jors.2602524

This paper proposes a methodology to obtain reliable spatial maps of price competition using store-level scanner data. Specifically, a procedure to obtain a symmetric matrix of similarities between brands considering their substitutability depending on price variations is proposed. The matrix is derived from a market response model where price cross-effects are split into two components. The first component accounts for the fact that price variation in one brand can have different effects to price variation in other brands (ie j → j′≠j′ → j). The second component accounts for the fact that the price of each brand can have different effects across competing brands (ie j → j′≠j → j ″ ). The matrix is obtained by imposing symmetry on this second component of price cross-effects. The parameterization of this symmetric matrix of similarities as the distances between the spatial representations of brands allows us to obtain the positioning maps. The proposed approach is illustrated through an empirical application.