GAME-THEORY AND EMPIRICAL GENERALIZATIONS CONCERNING COMPETITIVE PROMOTIONS

This paper offers the generalization that competitive promotions are m ixed strategies. First an empirical regularity is established that pro motions are independent across competitors. This regularity is then el aborated on in the context of a promotion game. The promotion game is linked to observable outcomes, and a classification of possible situat ions is developed. In particular, the classification includes the pris oners' dilemma, battle of the sexes, and marketing models of promotion competition. The evidence for the generalization comes from a variety of product markets, spanning trade promotions, retail price reduction s, and retail promotions such as advertised specials. The product mark ets include coffee, baby diapers, toilet tissue, saltines, dishwashing fluid, ketchup, and detergents, among others. The data in some cases were from cooperating grocery chains and in others from IRI scanner pa nels. The evidence from extant research and from new analyses is prese nted. Each situation is identified as belonging to one or another elem ent of the classification. Based on the entirety of the evidence, ther e is strong support for the proposition that competitive promotions ar e mixed strategies. A second generalization, based on more limited dat a, is that the depth of promotion has a bimodal distribution. Implicat ions of the generalizations both for managerial practice and future re search are discussed.