Termination of Price Wars
A Signaling Approach
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Beschreibung
Price competition frequently degenerates into its most devastating form: a price war. As the general consensus is that price wars substantially damage the firms involved a new approach is necessary to put an end to these conflicts.
Michael Bungert investigates the possibility to terminate (non-beneficial) price wars through appropriate signals. In an experiment, he analyzes the effect of different types of signals such as switch-blocking intent, reciprocity, co-operation, weakness, and hostility on the price reaction behaviour of a competitor. The author shows the consequences of marketing moves such as individual refunding guarantees, coupons, image advertising, price-matching guarantees, verbal statements and unilateral price increase for the generation of the mentioned signals. He demonstrates that all signal types show a considerable effect on the probability of a co-operative price reaction.
The aim of Dr. Bungert's dissertation research is, in general, to invent a new approach to the termination of conflict in interdependent mixed-motive situations. More specifi cally, the conflict situation was in form of a price war setting. Dr. Bungert based some of his investigation on the concept of competitive market signaling concept. Research conducted over the past decade or so allows to argue that competitive signaling provides interesting explanations of factors and structures that may be relevant to firmlbusiness interaction in competitive markets and, thus, to con flict resolutions in general. In addition, Dr. Bungert combines approaches of game theory and social psychology in experimental research into a very creative framework. More precisely, Dr. Bungert managed not only to "solve" the research problem assig ned - he did so by employing most commonly used members of the marketing mix such as pricing/couponing or advertising. Naturally, thus, his work can be expected to have immediate managerial relevance and bearing. Further, the methodology employed (experiments, logit/probit analysis, etc.) is clearly reflective of state-of-the-art research methods in the marketing discipline.
Price competition frequently degenerates into its most devastating form: a price war. As the general consensus is that price wars substantially damage the firms involved a new approach is necessary to put an end to these conflicts.
Michael Bungert investigates the possibility to terminate (non-beneficial) price wars through appropriate signals. In an experiment, he analyzes the effect of different types of signals such as switch-blocking intent, reciprocity, co-operation, weakness, and hostility on the price reaction behaviour of a competitor. The author shows the consequences of marketing moves such as individual refunding guarantees, coupons, image advertising, price-matching guarantees, verbal statements and unilateral price increase for the generation of the mentioned signals. He demonstrates that all signal types show a considerable effect on the probability of a co-operative price reaction.
Autor*in
Michael Bungert
Themen in »Termination of Price Wars«
Preiskrieg Preiswettbewerb Regression, logistische Signaling Spieltheorie conflict conflict situation data analysis design game theory marketing pricing probability social psychology Ökonomie, experimentelle