Price competition, quality and income disparities

Gabszewicz, Jean Jaskold; Thisse, Jacques‐François

doi:10.1016/0022-0531(79)90041-3

Cited by 863 publications

(507 citation statements)

References 4 publications

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“…Hence, the original situation can't be an equilibrium. With firms' products fixed, however, there generally exists a pure price equili brium; see, for example, Gabszewicz and Thisse (1979). (With identical products, this is nothing but the well known Bertrand (1883) equilibrium.)…”

Section: Review Of the Literaturementioning

confidence: 99%

Product and Price Competition in a Duopoly

1988

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This paper examines the role of consumer preferences, costs, and price competition in determining the competitive product strategy of a firm. In the model studied here, there are two identical firms competing on product quality and price. They face consumers who prefer a higher quality product to a lower quality product, but differ in how much they are willing to pay for quality. The consumers can also choose a substitute if they don't like the product-price offerings of the two firms. For the firms, a higher quality product costs more to produce than a lower quality product. The paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor, with the firm choosing the higher quality choosing the higher margin as well. This differentiation, however, is not efficient—that is, it is possible to choose two other products and offer them at prices that cover their marginal cost, and still satisfy consumers' “needs” better in the aggregate. A monopolist, by contrast, would differentiate his product line efficiently. This suggests that cannibalization has different effects on product strategy than competition. The paper also shows that if one firm enters the market first, then it can defend itself from later entrants, and gain a first-mover advantage, by preempting the most desirable product position.product strategy, pricing strategy, game theory

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Section: Review Of the Literaturementioning

confidence: 99%

Product and Price Competition in a Duopoly

1988

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“…13 If a tariff at rate t is imposed, the revenue of the foreign firm, when it sets a market price of p , is (1-t)p Q (p ,p) . Note that the example of a linear model that satisfies these assumptions is that of Gabszewicz and Thisse (1979), also used by Shaked and Sutton (1982). …”

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confidence: 99%

Trade Restrictions as Facilitating Practices

Krishna

1985

104

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This paper deals with the effect of trade restrictions on competition In Ol1gopolIstc markets. Quantitative restrictions, such as VER's (Voluntary Export Restrictions) are shown to affect the extent to which foreign firms can compete in the domestic market, and hence to raise the equilibrium prices and profits of both domestic and foreign firms -when such restrictions are not too severe. This increase in prices and profits is shown to make it unlikely for VER's to raise National Welfare. In addition, I show that domestic output may fall due to the VER's. For these reasons, VER's do not seem to be desirable ways of restricting imports.Tariffs and Quotas are also shown to be non-equivalent in such oligopoly models. A comparison of the effects of tariffs and quotas shows that it would be in the interest of domestic manufacturers t lobby for

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“…For assumption (iii), empirical studies suggest that consumers can be clustered into different market segments based on their service requirements. In addition, the uniform distribution assumption follows a common practice in prior economic literature that model consumer taste on quality (e.g., [11][12][13]). In these studies, consumers are heterogeneous and the heterogeneous sensitivity parameter is uniformly distributed.…”

Section: Model Developmentmentioning

confidence: 99%

A Cooperative Mechanism Between China Post and Private Express Firm for Remote Area Express Market

Liu¹,

Zhang²

2015

Journal of Systems Science and Information

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Focusing on the universal express service market, this paper introduces a cooperative mechanism between China Post and private express companies. To investigate whether this cooperative mechanism works, the authors develop a pricing model for the express service market in three different scenarios, i.e., China Post monopolizes the remote area market, competes with a private express company, and cooperatively provides service to the private company. Comparison between the three different scenarios shows that the proposed cooperative mechanism will benefit both firms. The authors also introduce a revenue sharing contract to coordinate the system, and investigate the optimal regulation price.

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Price competition, quality and income disparities

Cited by 863 publications

References 4 publications

Product and Price Competition in a Duopoly

Product and Price Competition in a Duopoly

Trade Restrictions as Facilitating Practices

A Cooperative Mechanism Between China Post and Private Express Firm for Remote Area Express Market

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