Does anyone know if there exist papers discussing how to model price competion in duopoly/oligopoly with the price as an endogenous variable.
An example would be an expiring patent and the following price decrease for the product.
Thanks for the help
Price competition
endogenous prices
Hi
The best thing to do is to consult the SD organization web site and to browse the archives.
There is not much written on pricing generally.
I have myself browsed the archives to look about pricing and revenue management.
I did not find anything on the subject.
There is an explanation about that fact.
Generally SD’ers prefer to deal with pure endogenous models because exogenous data cannot be
modelled.
But doing this, may produce an unrealistic model because it is not evident to forget outside influences.
And integrating the future price behaviour of competitors is difficult.
For example in your model, trying to incorporate the price behaviour of competitors is to my opinion a
pure academic work that will not convince any end user that has to take real decisions.
An example of model that does not incorporate competitors is the Kim Warren’s model about the fund
management company in the last system dynamics review.
The model tries to model the next three years depending on the pricing policy of the company.
But to my opinion as an end user, the model is not credible because the model supposes that the competitors
have no reaction to the change of pricing policy which is completely unrealistic.
I think that as an end user it is better in that case or to find some way to incorporate the pricing competition
strategy or not to model anything if it is too difficult.
Regards.
JJ
The best thing to do is to consult the SD organization web site and to browse the archives.
There is not much written on pricing generally.
I have myself browsed the archives to look about pricing and revenue management.
I did not find anything on the subject.
There is an explanation about that fact.
Generally SD’ers prefer to deal with pure endogenous models because exogenous data cannot be
modelled.
But doing this, may produce an unrealistic model because it is not evident to forget outside influences.
And integrating the future price behaviour of competitors is difficult.
For example in your model, trying to incorporate the price behaviour of competitors is to my opinion a
pure academic work that will not convince any end user that has to take real decisions.
An example of model that does not incorporate competitors is the Kim Warren’s model about the fund
management company in the last system dynamics review.
The model tries to model the next three years depending on the pricing policy of the company.
But to my opinion as an end user, the model is not credible because the model supposes that the competitors
have no reaction to the change of pricing policy which is completely unrealistic.
I think that as an end user it is better in that case or to find some way to incorporate the pricing competition
strategy or not to model anything if it is too difficult.
Regards.
JJ
price competition
Hi
In Sterman's book business dynamic there are some examples how price policy influences positive loops, although the price policy is itself driven by positive loops.
I moderate what I said about my preceeding post.
The best way to see if one can model or not is to try.
It all depends on the context and what one knows about the
eventual policy of the competitors.
Regards.
JJ
In Sterman's book business dynamic there are some examples how price policy influences positive loops, although the price policy is itself driven by positive loops.
I moderate what I said about my preceeding post.
The best way to see if one can model or not is to try.
It all depends on the context and what one knows about the
eventual policy of the competitors.
Regards.
JJ