Flanking In A Price War

7 Pages 1706 Words

ion could be made each week whether or not to continue the experiment and gather more information.

Pricing Experiment Results

The study was conducted to monitor the responses to price changes for stock-up and non-stock-up products. It was believed that the sales response to price changes for stock-up products would be larger than that of non-stock-up products. It was also believed that demand elasticity would be larger for price cuts as compared to price hikes. The study confirmed these two hypothesizes. Consumers showed that they are more sensitive to the price changes of stock-up products, while a change in the price of non-stock-up products produces little change in demand. The study suggests that if a store was facing price cuts, stock-up products should be the items that prices are reduced on. The prices of the non-stock-up products can either remain the same or inflated to make up for the price cut of the stock-up items.

Price-cutting in an oligopoly creates competitive reaction to meet new prices. The case study demonstrated that the co...