Competitive parity

Competitive parity
Primary topic
Related topics
Methods and techniques

Definition of competitive parity describes a process of allocating a budget for promotional activities. Competitive Parity includes activities which keep value for the business and are not rare. Competitive parity may be expressed like a valuable activity that is homogeneously spread amongst firms. If valuable activities are different from competitor's activities or not rare then it might be implied that they are homogeneously spread amongst competing firms. In this case, this activity determines a competitive parity at best[1].

Principles of competitive parity[edit]

The principles of competitive parity which are an alternative to the parity principle, are in the interest of Taylor and Kahn, who envolved the principles into a comment on Sidak and Baumol's efficient components pricing rule. The main point of there principles is to guarantee that the competition between the inspector of an intermediate productive input and its virtual rivals in end-user markets is efficient. These one's principles are included in two rules:

  • the retail operations of the firm monitoring the input have to be subject to the same access or correlation charges as it spread on its competitors, (except for the area that the incremental costs of supplying that service to itself and to its competitors are different) and
  • the input supplier's retail charges have to recover both that interconnection charge or access and also the incremental cost of its own retail operations. That rules make the same results as the efficient component pricing rule, but with a subtle difference.

Sidak and Baumol suppose that the retail downstream price is given, and obtain the terms of access to upstream inputs. However, Taylor and Kahn suppose that the terms of access to upstream amenities are arriving and given at the proper retail price needed for competitive parity. Fundamentally Taylor and Kahn obtain the proper relationship between downstream and upstream prices required for competitive parity and complete that the contribution from the downstream service could be compared with the contribution from the upstream service. Nevertheless, the Taylor and Kahn approach are not different from the Sidak and Baumol approach. It only looks in different ways at the same problem and obtains a method of arriving at the downstream price floor which will guarantee competitive parity[2].

Competitive advantage[edit]

This category includes activities that represent or support the firm's services or products to its customer and might consist of significant intangible capabilities and resources, which are used to compete with the firm's competitors in a given industry[3].


  1. (P.Kotler, G. Armstrong 2010)
  2. (W. Sapronov, W.H. Read 1998)
  3. (K. Grant 2008)


Author: Agnieszka Piwowarczyk