Price competition during and after promotions

We provide a framework for setting regular prices and using promotional discounts in a duopoly where long-term promotional effects are present and the firms' pricing and promotional strategies are common knowledge (e.g., as in online markets). We show that at equilibrium, the two firms may not promote and instead adopt an Everyday Low Price (EDLP) strategy. Consumers' tendency to stockpile promoted products, the level of brand loyalty and product differentiation, and the possibility of a postpromotional sales increase critically influence regular prices, price discount rates, and profits. Under some conditions consumer stockpiling intensifies promotional competition and reduces firms' profits while the possibility of attracting new consumers reduces the need to heavily promote and ensures better profits. Managerial implications are discussed. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd. Dans cet article, nous proposons un cadre de fixation des prix reguliers et des rabais promotionnels dans un duopole ou les promotions ont des effets a long terme et ou les strategies des deux firmes sont accessibles et connues (par exemple dans les marches en ligne). Nous montrons qu'a l'equilibre, les deux firmes peuvent ne pas promouvoir et adopter la strategie de bas prix tous les jours (EDLP). Les phenomenes de differentiation et de loyaute aux marques, de surstockage des produits en promotion et d'acquisition de nouveaux consommateurs influencent les prix reguliers, les rabais et les profits. Dans certaines conditions, le surstockage intensifie la concurrence et reduit les profits, tandis que la possibilite d'attirer de nouveaux consommateurs diminue les rabais promotionnels et ameliore les profits. Nous cloturons notre etude en analysant ses implications pour la gestion. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.

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