Take Action

Home | Faculty & Research Overview | Research

Research Details

Price Competition with Repeat, Loyal Buyers, Quantitative Marketing and Economics


Extant promotion models predict that a leading brand should either offer infrequent, deep discounts or frequent, shallow discounts. However, in some markets, the leading brand offers the deepest and most frequent discounts. In this paper, we develop a dynamic model of two competing firms that can explain why leading brands may use this pricing strategy. Our model considers a duopoly in which each firm differs in their ability to convert consumers who are initially indifferent into repeat, loyal buyers. We show that it is optimal for a leading firm who attracts more repeat, loyal buyers to sustain its market position via deep, frequent discounts. The unique aspect of our paper is that we analyze how firm's relative ability to attract repeat, loyal consumers affects their pricing strategies. Our analysis highlights three additional results. First, there is an inverted-U relationship between a weak firm's ability to attract repeat, loyal consumers and strong firm profits. Second, the relative ability of firms to attract repeat buyers affects whether serial and contemporaneous price correlations are positive or negative. Third, a comparison of myopic and dynamic pricing strategies shows that myopia only benefits both firms when each attracts a sufficient number of repeat buyers.




Eric T. Anderson, Nanda Kumar

Date Published



Anderson, Eric T., and Nanda Kumar. 2007. Price Competition with Repeat, Loyal Buyers. Quantitative Marketing and Economics.(4): 333-359.


Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more


Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.


Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more