Author
Pauwels, Koen Hendrik, D’Aveni, R.
Publication Date
2016-01
Publication Place
-
Springer Science+Business Media
Subject
Price, Quality positioning, Differentiation, Fair value line, Competitive dynamics, Market evolution, Dynamic competition
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
1552-7824
Record ID
0beafe21-7810-4804-9c9b-e201ee29a0d5
Library Location
Business Administration
Date
2016-01
Notes
Due to copyright restrictions, the access to the full text of this article is only available via subscription.
Sample Text
This paper develops a theoretical framework to address how dynamic competitive interactions and customer preferences change the observed relationship between market price and quality, and it offers an empirical framework to study these phenomena. Our framework proposes that price–quality relationships in a market (the fair value line) evolve according to several processes. We define and discuss these processes, including: (1) line formation, (2) line evolution (comprised of line elevation, erosion, steepening, flattening, blurring, tightening, extension and contraction), and (3) line replacement, which involves redefining price or quality in the marketplace. Instead of assuming that prices are a stable function of observable product attributes only (the static equilibrium view), our framework generalizes to dynamic disequilibrium patterns observed in many industries. These patterns are empirically assessed and explained by customer, competitive, and technology forces analyzed in marketing and strategy literatures. For managers, we discuss how they should react to these processes or, even better, set them in motion. For marketing researchers, we specify several hypotheses on the processes’ antecedents and consequences, testable with readily available datasets.
DOI
10.1007/s11747-014-0408-3
