Competitive reaction- and feedback effects based on VARX models of pooled store data

Horvath, C., Leeflang, PSH., Wieringa, JE. & Wittink, DR., Dec-2005, In : International Journal of Research in Marketing. 22, 4, p. 415-426 12 p.

Research output: Contribution to journalArticleAcademicpeer-review

We apply a model that accommodates dynamic phenomena in demand- and reaction functions. The latter functions capture reactions to actions as well as to consequences of actions. We estimate a fixed effects VARX model with dynamic and interactive effects for multiple brands based on pooled time series and cross-sectional data for two product categories. The Impulse Response Analysis (IRA) results for one category (tuna) under different scenarios show that the inclusion/exclusion of competitive reaction-and feedback effects matters a lot, consistent with a high degree of competitive interaction in this market. We find that the role of cross-brand feedback effects is greater than the role of traditional competitive reaction effects. Intrafirm effects (internal decisions) also play an important role. In a decomposition study we show that the exclusion of these effects may either increase (up to 12%) or decrease (by as much as 50%) the net unit sales effect of a 20% price reduction. By contrast, in the second category (shampoo), where brands have distinct positions, the exclusion of these effects matters very little. (c) 2005 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)415-426
Number of pages12
JournalInternational Journal of Research in Marketing
Issue number4
Publication statusPublished - Dec-2005


  • decomposition of reaction functions, VARX modelling, pooled data, cumulative promotion effects, PRICE PROMOTIONS, TIME-SERIES, MARKET SHARE, SCANNER DATA, SALES, BEHAVIOR

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