Analyzing the effects of a brand introduction on competitive structure using a market share attraction model

The introduction of a new brand may change the competitive structure, which concerns the market shares and the marketing instrument elasticities. For example, the new brand can cause intensified price competition and possibly also influence the relative effectiveness of price promotions for the incumbent brands. In this paper, we develop a methodology to statistically test for the various possible changes in the competitive structure, where we focus on weekly scanner data. We develop a market share attraction model with which we can handle a changing number of brands. The usefulness of our approach is illustrated in a simulation experiment where its implementation is compared with various alternative methods. We further develop tests to infer whether there are competitive reactions to an entry. Our illustration to scanner data for the detergent category emphasizes the usefulness of our approach.