Profit Impacts of Aggressive and Cooperative Pricing Strategies

Abstract

We study profit impacts of aggressive/cooperative pricing strategies in a dynamic oligopolistic environment. A logistic model with asymmetric reference prices is used to forecast market shares. Pricing strategies — optimized by simulated annealing — axe evaluated by simulating the empirical price distribution of competitors. It is shown that there are regions on the aggressiveness/cooperation path that a rationally operating manager would prefer to others, namely where his position is strongest as compared to the position of all rivals.