Flanking In A Price War
Article Main Points Summary
This article was written to analyze a pricing experiment in the Quebec, Canada grocery industry. The "Hometown Prowd" IGA supermarket chain was the pioneer and facilitator of the experiment.
The article's main focus is on the Steinberg grocery chain. Steinberg's was the market leader until approximately 1980. The beginning of the article also explains and provides a summary of each retailer's history. Steinberg's became notorious for slashing prices and creating many obstacles for competitors in the industry. Thus, the president of IGA used academic resources from the United States and Canada to help comprehend the price relationship between goods and price modifications. This research was performed so IGA could form the most effective pricing strategy for the market. Hudon and Deaudelin (owners of the IGA name in Quebec) did not want to utilize the normal, typical price reduction scheme used by most grocers.
The Bayesian Theory was what the experiment was based on. The Bayesian Theory was, "named for Thomas Bayes, an English clergyman and mathematician, Bayesian logic is a branch of logic applied to decision making and inferential statistics that deals with probability inference: using the knowledge of prior events to predict future events."
(http://whatis.techtarget.com/definition/0,,sid9_gci548993,00.html)
The experiment revealed two main categories of grocery products, those being stock-up goods and non-stock-up goods. Each category had different price sensitivity. In essence, the result of the experiment was that IGA was able to use the data and erudition gathered to develop the most effective pricing strategy during the price war.
Pricing Experiment Design
In essence, this experiment was developed to examine the concept of inventory stockpiling and in turn, its response to price modifications. Generally...
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