Research on pricing policy of three competitors with service level based on Hotelling model

Abstract

In order to achieve competitive advantage, many enterprises usually adjust prices to obtain more customers and maximize their profits. Thus, pricing policy is of vital and associated with many factors. Based on Hotelling model, the optimal prices of multi-competitors are deduced with respect to maximum profit. The paper takes three competitors for example and compares the optimal prices with different constrained conditions. Theory studies indicate that if service levels of three competitors are the same, the optimal price located in the middle is lower, if not, the optimal prices related to locations and service levels are difficultly compared.