EDLP점과 PROMO점의 공존모형에 관한 연구

The study on the coexistence model of EDLP store and PROMO store

&nbsp;&nbsp;From 90&quot;s, the biggest change in Korean retail industry is the sharp increase in retail stores using different pricing strategy. Sales volume of discount stores surpassed that of traditional department stores, and membership wholesale clubs have been favored by many consumers. New retail format, like discount stores or membership wholesale clubs, are characterized by the use of Everyday low pricing. Everyday low pricing (EDLP) is the pricing strategy offering constant price lower than that of competitive stores. Traditional department stores or supermarkets offer lower sale price for limited number of items, rotating sale items. This pricing strategy is called promotional pricing (PROMO).<BR>&nbsp;&nbsp;Which pricing strategy is better, EDLP or PROMO? In reality, we can observe that some stores use PROMO and others use EDLP. That means one pricing strategy does not dominate the other. The purpose of this research is to show that stores using PROMO and stores using EDLP can coexist in the same market. We show that a firm can do better by opening both PROMO stores and EDLP stores, than by opening PROMO stores only or EDLP stores only.<BR>&nbsp;&nbsp;Through simple economic model, following results are found:<BR>&nbsp;&nbsp;First, PROMO-EDLP Nash equilibrium holds for some range of fixed cost, when (1) all three types of PROMO shopper, EDLP shopper, and store switchers exist, and (2) the size of low moving cost segment is sufficiently small, and (3) moving cost difference is sufficiently large.<BR>&nbsp;&nbsp;Second, PROMO-EDLP Nash equilibrium does not hold, when the size of low moving cost segment is large and moving cost difference is small, so that one of PROMO shopper, EDLP shopper, and store switchers does not exist.<BR>&nbsp;&nbsp;Third, under PROMO-EDLP Nash equilibrium, the constant price of EDLP store is lower than the regular price of PROMO store and higher than the discount price of PROMO store.<BR>&nbsp;&nbsp;Finally, under PROMO-EDLP Nash equilibrium, profit advantage of PROMO-EDLP over PROMO-PRMO or EDLP-EDLP increases with moving cost difference and the size of low moving cost segment.