Product Price Discounts Equilibrium Analysis

In the market with fierce competition, companies must constantly use a newcompetitive strategy to deal with competition in order to adapt to market changesand protect their own profits. In the retail market, price is remarkable for products,so price competition is inevitable. Price competition is essentially to put price as alever to compete by direct or indirect price change. Price competition mostlymanifests as commodities discounts behavior. Companies always widely usepromotion strategy to develop the market and stimulate consumers’ the purchaseneeds. Currently, the most widely used discounts behaviors are pricecutting, couponredemption promotion, gift-buying promotions.Different discounts have different operation strategy and implementationprocess. This paper introduces different discount promotions, and compares them.Since price discounting charges different price for different customers, so chaper2treats it as a price discrimination.Related to the demand elasticity, chaper3discusses how price-changing affectscompanies’ total revenue and total profit. For better revenue and profit, they shouldconsider the size of demand elasticity, it is different for them to increase or decreasethe price and to what extent they can reach the goal. If the product has a big demandelasticity, the seller should reduce the price to some extent, it’s not profitable whenthe pricecutting is out of the range. So it also should be considered when makingdiscount promotion in complex market.This paper also analyses consumer utility under coupon promotion. Supposeconsumers has a buying plan amount, and the seller develops coupon promotion, ifplan to come if consumers utility of the exceeding purchase is more than that ofrebuying coupon, consumers are willing to buy more up to the coupon point,choosing the promotion product. From the sellers’ perspective, assume the market isdouble-monopolized based on Hotelling model, discounting strategy can beexplained as the customer switching costs, locking old customers and attracting newbuyers switching costs, add this parameter to the profit formula, caculate theequilibrium price.Finally, the paper brings China mobile communication market as an exampleof monopoly, expounds its operating status of monopolistic competition in themarket. Combined with the reality, sums up some available discount service type forthe customers. All these favorable service are also one type of discount strategies. Inspite of varieties forms of the discout strategies, the provider just expect nothing butimprove the conversion costs for consumers and improve mobile users’holding-rate,so they can to ensure that the user continue to enjoy the existing service providers,and through a variety of business portfolio to attract new consumers into the market.The paper gives some suggestions to improve switching costs, making mobileservices more popular. it may help to bring out some guiding significance for thelong-term development of China mobile communications market.