Definition
Product categories or groups of categories in which the numerous brands within that category have functionally comparable features are referred to be parity products. This means that one brand may serve as a sufficient alternative for the majority of the other brands in the same category. It is a product or service that fits a demand that a customer has that is not met by another product or service in the same category.
What is ‘Parity Product’
A brand of a product that is sufficiently similar to other brands of the same good type that it is deemed easily substitutable is known as a generic brand. A parity product is a product that is functionally comparable to a product supplied by a rival. The availability of parity goods indicates that there is no monopoly in the market. Dental paste and contact lens solution are examples of items that may be termed parity products.
Explaining ‘Parity Product’
Because of the substitution effect, a firm supplying a parity product will almost always be unable to charge a premium price. In the event that a firm increases its price and its rivals do not, customers will purchase less of the business’s product and instead purchase competitive items. Thus, the cross elasticity of demand for competing products will be positive, since a rise in the price of one brand’s item will result in an increase in the demand for another brand’s good, and vice versa.
Parity Product FAQ
What is increase in brand parity?
When customers believe that main products in a product category are comparable, this is known as perceived brand parity. The level of brand parity is high when a customer perceives all of the main products in a product category as being comparable.
What are the three types of points of parity?
Points of parity may be used to your advantage as a defensive or offensive strategy against your adversary, and they can be classified into three categories: category, correlational, and competitive parity. When we hear the phrase 'points of parity,' the first thing that comes to mind is usually a category of points.
Further Reading
- Purchasing power parity – www.nber.org [PDF]
- Risk parity portfolio vs. other asset allocation heuristic portfolios – joi.pm-research.com [PDF]
- Purchasing power parity tests in cointegrated panels – www.mitpressjournals.org [PDF]
- The purchasing power parity puzzle – www.jstor.org [PDF]
- Currency valuation and purchasing power parity – papers.ssrn.com [PDF]
- The purchasing-power parity doctrine: a reappraisal – www.journals.uchicago.edu [PDF]
- Does the nominal exchange rate regime affect the real interest parity condition? – www.sciencedirect.com [PDF]
- Parity pricing and its critics: A necessary condition for efficiency in the provision of bottleneck services to competitors – heinonline.org [PDF]
- Testing purchasing power parity for Japan and the US: A structural-break approach – www.sciencedirect.com [PDF]
