Measuring Price and Quality Competition

Abstract

Portfolio management requires precise measures of price and quality competition across relevant lines. A methodology is proposed that uses the Law of Comparative Judgment to transform ordinal comparisons between firms into reliable price and quality scales. Results are presented for five broadline manufacturers and fifteen subsidiaries competing in eight product classes in major appliances. The scale values and subsequent interpretations are substantiated by two major trade studies commissioned by the appliance industry. Implications for integrating quality considerations into the strategic planning process are discussed.