Our specific research questions include the following:
How do multiple, asymmetric firms compete for multiple
switcher and loyal segments? How do firms differ in their
price dispersion, including the frequency and depth of their
promotions, in terms of their loyal and switcher customer
bases? and Why do some small retailers price high and others
offer deep discounts? Our results demonstrate that a
retailer’s pricing is driven by the ratio of switchers for
which the retailer competes to its loyal segment size. The
retailers’ relative switcher-to-loyal ratios (SLRs) explain
when a large or small firm is more or less inclined to discount
deeply or frequently or when a small firm with few
loyals is better off pricing high.