A Simulation Analysis of Alternative Pricing Strategies for Dynamic Environments/Comments

A strategic pricing simulation model is described, which allows realistic representation of supply and demand dynamics, and the determination of long-range pricing strategies. The model analyzes dynamic consumer demand and firm supply characteristics for a 2-firm market comp of a product leader and...

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Bibliographic Details
Published in:The Journal of business (Chicago, Ill.) Ill.), 1984-01, Vol.57 (1), p.S179
Main Authors: Clarke, Darral G, Dolan, Robert J, Friedman, James W, Kalish, Shlomo
Format: Article
Language:English
Subjects:
Analysis
Market strategy
Pricing
Simulation
Strategy
Studies
Variance analysis
Online Access:Get full text
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Summary:A strategic pricing simulation model is described, which allows realistic representation of supply and demand dynamics, and the determination of long-range pricing strategies. The model analyzes dynamic consumer demand and firm supply characteristics for a 2-firm market comp of a product leader and a future entrant. Demand dynamics are modeled by market segment, future consumer product needs, and the valuation consumers place on the firm's and entrant's products. The model allows identification of the conditions under which skim- and penetration-pricing strategies should be undertaken. Game theory should be useful in enhancing strategic pricing models, while the simulation model is useful in providing insight into pricing strategies, but should be used with caution in practical application.
ISSN:0021-9398
1537-5374