Flanking in a Price War Article Summary Essay -- Economics Prices Econ

Flanking in a wrong War Article SummaryThe article begins by giving a brief analysis of a study that was conducted in Quebec in the other(a) 1980s involving the grocery industry. It discusses a tear down of metre before the draw in food marketplace share, Steinberg, Inc., initiated a price war. One of the writes of the article, Roger J Calantone, was multiform in an experiment with one of the smaller grocery chains, IGA. The experiment was designinged to see what IGA should do so as to wait positivity if their main competition launched an all out price war. The main lead was that certain goods, if prices were lowered, would brook more favorable price demand shot than other goods. This would enable the grocer to not let to slash prices across the board, sooner only cut prices on specific goods so as to retain profitability during a price war with the other competitors. During this time, the other competitors combine had controlling market share.The piece gives a back ground of the Quebec grocery market between 1950 and 1983, and discussed the main players in the market in this time period. It specifically discusses Steinberg, Inc. This grocery chain, as previously mentioned, was the market leader for most of this time until 1980 due to some questionable pricing strategies it had implemented as intumesce as some political changes that occurred in the late 1970s. The next point of the article was to discuss a pricing experiment IGA and the author chose to follow to help combat a price war initiated by its competitors. The premise of the experiment was to ascertain if certain goods were reduced in price, spot others maintained or increased price, what would happen to overall demand snap bean as well as specific goods demand elasticity. The goods were divided into 2 key components and these were stock-up goods (non-perishable items that could be bought in bulk) and nonstick-up goods (perishable items). The methodology and results of the experime nt was discussed in this treatment. The results at long last fell in favor of IGA and thusly they were able to effectively fight and win a price war with its major competitors in 1983.Pricing Experiment DesignThe experiment used a covariance design within a Bayesian decision framework to determine that stock-up goods have a different demand elasticity than nonstock-up goods. (Calantone, et al, 1989, p.1) Bayes... ...sis. It also learned that tending(p) a price war it could even raise prices of nonstock-up goods to offset the baleful of the stock-up goods prices and not affect the elasticity of demand on the nonstock-up goods in a negative way.What Did I Learn?I learned that in an ogopolistic market it might be wiser to collaborate with competitors rather than aggressively attempt to pick out them out of the market. The Steinberg grocery chain, due to its aggressive pricing strategy, effectively bell itself market share and profitability. Rather than engage in this type of beh avior, Steinberg should have attempted to remain at market equilibrium as it was the dominant player. They should have considered the ramifications of eliminating competition, and what scenarios could potentially occur if they continued on with their current strategies.BibliographyCalantone, R., Droge, C., Litvack, D., Di Benedetto, C. (1989). Flanking in a Price War. Interfaces, 19, 1-12.Wessels, W.J., Economics (3rd ed.)Joyce, J., Bayes Theorem, The Stanford Encyclopedia of Philosophy (Winter 2003 Edition), Edward N. Zalta (ed.), http//plato.stanford.edu/archives/win2003/entries/bayes-theorem/>.