Price and non-price competition
| Price and non-price competition |
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Price competition
It is competition aiming to increase market share and profits, between entrepreneurs. It involves offering to buyers lower product prices than that offered by competitors. Price competition is a topic of great interest to economists who perceive it as a coordinating power, leading to the compatibility between the volume of production and the quantity of goods that consumers are able to buy.
Non-price competition
It is rivalry between entrepreneurs based on the use of non-price characteristics of products or services that influence the transaction decisions of the customers. These characteristics should include, first of all the quality of goods and services and access information about products (e.g. advertising), which allows increase of the degree of market transparency and develop preferences of buyers. In addition, elements such as the conditions of sale of goods manufactured or services provided (e.g. credit), guarantee conditions, maintenance services, attractiveness of shopping, time of service, loyalty and functionality.
Comparison of price and non-price competition
Both price and non-price competition that exist in a capitalist system are the result of rivalry between companies having limited resources.
Price competition occurs as a result of balancing between supply and demand for specified goods. Results of non-price parameters competition are changed qualitative characteristics of individual goods and services.
Marketing and types of competition
Marketing allows companies to participate in various kinds of price and non-price competition. From the point of view of participation in the processes of competition, marketing is a universal mechanism of action on the market. All kinds of competition are based on the instruments and activities, which are at the same time the content of the instrumental structure of marketing.
References
- Gabszewicz, J. J., & Thisse, J. F. (1979). Price competition, quality and income disparities. Journal of economic theory, 20(3), 340-359.
- Moorthy, K. S. (1988). Product and price competition in a duopoly. Marketing Science, 7(2), 141-168.
- Shaked, A., & Sutton, J. (1982). Relaxing price competition through product differentiation. The review of economic studies, 3-13.
