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A market where two groups of brands, premium (higher priced) and private label (lower priced) are sold is considered. It is assumed price is the only indicator of quality. Using hypotheses about consumer behavior in such markets, a model for changes in market share that would result from temporary price reductions by one of the premium brands is constructed. The model is used to develop promotional strategies for one of the premium brands, given various assumptions about competitive behavior. Methods for use of the model are suggested.
Kinberg et al. (Fri,) studied this question.