Reduction in Selling Price after the Introduction of Competition

Abstract

Price is one of the most important and least understood factors of marketing. For a significant number of goods and services, price is established by the technique of competitive bidding. In many instances such competitive bidding occurs after the items have been priced under monopolistic conditions. A study of 356 items which had been priced under sole source and then under competitive conditions showed that the introduction of competition is associated with a reduction in unit price of between 10.8 and 17.5%, depending on the size of the order. The number of units purchased also has a significant effect on price.