Estimating the optimal price based on market prices of competition and forecasting reaction of competition in front of to changes in own deals
To model and predict the behaviour of a competitive market, and estimate the best prices to offer, is a task that brings enormous competitive advantages to the company. Knowing what the best company movements are, and how our competitors will react to changes, is vital to the company’s strategic positioning.
Knowing and anticipating market movement in which we work can modify the response to maintain optimum conditions for our results. This information is applicable to the estimation of market prices and negotiations, in order to get an overview of the behaviour of all members’ agents.
Grupo AIA provides innovative methods for estimating market prices. This is based on Game Theory, a theory that models the behaviour of a set of competing agents in a rational market. Thus, we can calculate the different possible market equilibrium.
- The Game Theory allows formulate the problem of pricing, taking into account not only the benefit to the company, but also reaction ahead of the competition.
- If we can predict how our competitors will react to our actions, we can act in the most beneficial way possible.
- Instead of acting and correcting the action based on the reaction of our competitors, we predict their reaction and act, so the reaction of our competitors is that we should be most interested reference to business level.
The Game Theory models provide:
- Estimating prices in different equilibrium
- Estimated market shares of the agents
- Calculation of the best strategy for a particular agent
- Calculation of the ideal response to an agent
- Changes in market environment
- Changes in rivalry
- Information of the forecast of elements that characterize maps pricing
AIA has successfully applied Game Theory to estimate prices and calculate market shares in the electricity market.