Promotion and pricing in competitive markets

Abstract

This paper provides a conceptual framework for health care managers to evaluate the relative desirability of competitive pricing or promotional policies. Competitive pricing or promotional decisions are defined as a function of two factors: the relative financial strength of the competitor and the potential marginal profit of the competitive action. Methods for measuring and assessing financial strength and marginal profit are described. As competition in the health care industry increases, the concepts and measures described should become very useful.