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| Author: | Basuroy, S. Nguyen, D. |
| Title: | Multinomial logit market share models: Equilibrium characteristics and strategic implications |
| Journal: | Management Science
1998 : OCT, VOL. 44:10, p. 1396-1408 |
| Index terms: | Market share Pricing Advertising Equilibrium analysis Models |
| Language: | eng |
| Abstract: | The conditions under which the Multinomial Logit Model (MNL) market share models are appropriate for equilibrium analysis are analyzed and specified. The results show that a linear price response function as is often used in empirical research would yield an interior equilibrium solution. The optimal reactions on pricing and marketing spending to entry and potential market expansion are considered. It is demonstrated in the context of the MNL models that the entry of a new brand evokes a decrease in the equilibrium prices of the existing brands as a defensive reaction. Also, further marketing and managerial implications for endogeneity of the number of firms are explored. |
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