Overall the results of the model estimation iden tify a stable structure of

Overall the results of the model estimation iden tify

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Overall, the results of the model estimation iden- tify a stable structure of dynamic price patterns in the analyzed digital camera market. The number and type of price patterns are consistent across model specifications. Class sizes and shape parameters vary across model specification but not to an extent that Downloaded from informs.org by [128.125.208.140] on 07 July 2015, at 13:01 . For personal use only, all rights reserved.
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Spann, Fischer, and Tellis: Strategic Dynamic Pricing for New Products Marketing Science 34(2), pp. 235–249, © 2015 INFORMS 245 Table 4 Estimation Results for Descriptor Variables of Multinomial Logit Model (Equation (2)) Dependent variable: Probability of pattern Pattern 1 Pattern 5 Pattern 7 Pattern 8 Pattern 9 (strategy) choice (Penetration pricing) (Skimming pricing) (Market pricing) (Market pricing) (Market pricing) Intercept - 0 0 475 (0.554) 0 0 108 (0.397) - 0 0 354 (0.466) - 0 0 427 (0.473) 1 0 148 (0.429) * Market level Market stage (DV) a 0 0 953 (0.323) ** 0 0 273 (0.258) - 1 0 019 (0.334) ** - 0 0 629 (0.330) 0 0 422 (0.248) Competitive intensity b 32 0 098 (14.29) * - 12 0 677 (8.56) - 29 0 412 (9.56) ** - 30 0 947 (9.53) ** 40 0 938 (11.55) ** Firm level Late entrant (DV) c 0 0 445 (0.250) - 0 0 339 (0.219) - 0 0 256 (0.289) - 0 0 306 (0.280) 0 0 456 (0.206) * Cumulated manufacturer sales 0 0 025 (0.010) * - 0 0 025 (0.013) - 0 0 019 (0.019) 0 0 001 (0.015) 0 0 017 (0.009) Brand/product level Established brand (DV) - 0 0 021 (0.240) 0 0 445 (0.220) * - 0 0 082 (0.282) - 0 0 097 (0.279) - 0 0 246 (0.194) Distribution strength 0 0 026 (0.009) ** 0 0 015 (0.010) - 0 0 019 (0.014) - 0 0 060 (0.016) ** 0 0 039 (0.009) ** Breadth of product line 0 0 013 (0.019) - 0 0 002 (0.020) 0 0 005 (0.027) 0 0 016 (0.024) - 0 0 033 (0.017) Class size: # camera models 141 136 79 82 225 # observations = 663; classification rate = 43.2%; proportional chance = 23.2%; maximum chance = 33.9% Notes . For identification purposes the parameter estimates for each variable sum to zero across the five patterns. They should be interpreted as deviation from the overall mean of zero. Standard errors are in parentheses. DV indicates a dummy variable. a 1 = Launch after takeoff; 0 = before takeoff. b Competitive intensity is measured by the Herfindahl index at launch of model. The coefficient is reverse coded for reading convenience. c 1 = Entry in or after 2000; 0 = before 2000. * p < 0 0 05; ** p < 0 0 01. would alter our interpretation. Rather, the differences reflect the explanatory power of important control variables. 5.3. Prevalence of Pricing Strategies Figure 3 summarizes our findings on the prevalence of pricing strategies. It shows that the majority, i.e., roughly 60% of camera models, follow a market- pricing strategy in this market. Thirty-four percent of cameras set the introductory price at launch at mar- ket level and also subsequently move in sync with the market price (Pattern 9). Thus, Pattern 9 appears to be the dominant market-pricing strategy. Another 21% follow a penetration strategy consistent with Pat- tern 1. About 20% follow a skimming strategy con- sistent with Pattern 5. We do not find evidence for other skimming or penetration patterns. Using the results from Table 3, the dominant penetration strat- egy in this market is to launch the product 18% below market price ( = 100 × 6 exp 4 1 s 5 - 1 7 ) and fur- ther lower the price over the life cycle. The monthly rate of decrease starts highest after the introductory period with - 12 0 8% and reduces over time ( = 100 × 3 s / ProductAge ). The dominant skimming strategy is to launch at a price 16% above market price and fur- ther increase the price relative to the market price. The rate of monthly increase starts with 8.5% per month
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