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Author: John Sutton
Publisher: MIT Press
ISBN: 9780262193054
Category : Business & Economics
Languages : en
Pages : 600
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Book Description
Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature over the past ten years and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors.
Author: John Sutton
Publisher: MIT Press
ISBN: 9780262193054
Category : Business & Economics
Languages : en
Pages : 600
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Book Description
Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature over the past ten years and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors.
Author: Tat Chan
Publisher:
ISBN:
Category :
Languages : en
Pages : 57
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Book Description
We investigate how manufacturers' advertising competition, when advertising has a dynamic impact on the goodwill that affects market demand, interacts with the price competition in a manufacturer-retailer channel. Specifically, we examine the strategic choices made by manufacturers, the role of the retailer in exacerbating or mitigating competition among manufacturers, the total channel profit and how that is split among the different players. Using prices, sales, and advertising data in the laundry detergent category we find that advertising and pricing are strategic complements as manufacturer advertising increases the price elasticity of demand; advertising competition intensifies price competition but it also improves the profitability of manufacturers; the presence of retailers in the channel leads to increased advertising spending while mitigating the extent of price competition. Manufacturers can enjoy a higher profit from using retailers when they compete in both price and advertising. Finally, we show that the emergence of ecommerce, which enables manufacturers directly selling to end consumers, has asymmetric profit impacts on manufacturers, as brands with lower cost and lower brand goodwill are more benefited from ecommerce.
Author: Federal Trade Federal Trade Commission
Publisher: CreateSpace
ISBN: 9781514156995
Category :
Languages : en
Pages : 48
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Book Description
Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Author: Lizhen Xu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper studies how to endogenously assess the value of a ldquo;superiorrdquo; advertising position within the price competition and examines the resulting location competition outcomes and price dispersion patterns. We consider a game-theoretic model in which firms compete for advertising positions and then compete in price for customers in a product market. Firms differ in their competence, and positions are differentiated in their prominence, which reflects consumers' online search behavior. We find that when endogenously evaluated within the product market competition, a prominent advertising position might not always be desirable for a firm with competitive advantage, even if it is cost-free. The profitability of a prominent advertising position depends on the trade-off between the extra demand from winning the position and the higher equilibrium prices when the weaker competitor wins it. We also show that the bidding outcome might not align with the relative competitive strength, and an advantaged firm might not be able to win the prominent position even when it does value that position. We derive two-dimensional equilibrium price dispersion, with the realized prices at the same position varying and the expected prices differing across different positions. We find that the expected price in the prominent position might not always be higher, implying that an expensive location does not necessarily lead to expensive products.
Author: Federal Trade Federal Trade Commission
Publisher: Createspace Independent Publishing Platform
ISBN: 9781530892402
Category :
Languages : en
Pages : 48
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Book Description
Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Author: George Symeonidis
Publisher: MIT Press
ISBN: 9780262264655
Category : Business & Economics
Languages : en
Pages : 558
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Book Description
A theoretical and empirical study of the effects of competition across a broad range of industries. Policies to promote competition are high on the political agenda worldwide. But in a constantly changing marketplace, the effects of more intense competition on firm conduct, market structure, and industry performance are often hard to distinguish. This study combines game-theoretic models with empirical evidence from a "natural experiment" of policy reform. The introduction in the United Kingdom of the 1956 Restrictive Trade Practices Act led to the registration and subsequent abolition of explicit restrictive agreements between firms and the intensification of price competition across a range of manufacturing industries. An equally large number of industries were not affected by the legislation. Using data from before and after the 1956 act, this book compares the two groups of industries to determine the effect of price competition on concentration, firm and plant numbers, profitability, advertising intensity, and innovation. The book avoids two problems common to empirical studies of competition: how to measure the intensity of competition and how to unravel the links between competition and other variables. Because the change in the intensity of competition had an external cause, there is no need to measure the intensity of competition directly, and it is possible to identify one-way causal effects when estimating the impact of competition. The book also examines issues such as the industries in which collusion is more likely to occur; the effect of cartels and cartel laws on market structure and profitability; the links between competition, advertising, and innovation; and the constraints on the exercise of merger and antitrust policies.
Author: Michael Kemmer
Publisher: GRIN Verlag
ISBN: 3656231257
Category : Business & Economics
Languages : en
Pages : 50
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Book Description
Seminar paper from the year 2009 in the subject Business economics - Offline Marketing and Online Marketing, grade: 1,3, University of Applied Sciences Berlin, language: English, abstract: When it comes to making buying decision, for example to buy a new car, the consumer is facing a numerous variety of prices for only one product. He or she has to decide whether to take the newest launched model or either the traditional one, with or without an insurance package, delivery or even buy from the internet. Naturally the consumer is reluctant to buy expensive products, when the run on cheap ones are omnipresent in today’s market. Companies try to undercut one another and conduct themselves in would-be price battles. But all this is owed to the fact that on the one side the consumers have decreasing real earnings, which lead to a higher price sensibility, and on the other side the companies look at saturated markets. These markets and their exhausted possibilities to differentiate the products cause a mass competition with the active implementation of pricing as a part of the marketing mix and as a competition instrument. This trend can not only be identified in the business to consumer (B2C) market, but it can also be found in the business to business (B2B) market. In addition an increasing consolidation processes in large parts of the industry and retailing business is recognizable by applying purchasing agents to trade cheaper prices by using their power of demand. Classical examples are the two big discounters like ALDI and LIDL, when it is obvious that they pass over these good conditions to their consumers and use this advantage in competition for their own business. Furthermore the internet with an increasing number of price comparison websites also contributes to this fight for the right price by offering price and product comparisons which hamper the strategies for a better price differentiation. A company’s survival and growth in such challenging and competitive environment depends among other things on the effectiveness of its applied pricing policy.
Author: London School of Economics and Political Science
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 0
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Book Description
Author: Lizhen Xu Ph. D.
Publisher:
ISBN:
Category :
Languages : en
Pages : 306
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Book Description
This dissertation performs economic analysis of search advertising from a comprehensive picture of the competition facing advertisers---by incorporating the price competition to endogenously investigate advertisers' bidding incentive, and taking into account consumers' online search and the unique information structure associated with the search advertising format. It consists of three essays based on game-theoretic modeling. The first essay studies the oligopolistic price competition among advertisers placed in different advertising positions, considering distinctive features of consumers' online search behaviors. We find an interesting local-competition pattern in which direct price competition occurs only between advertisers adjacent to each other. The second essay integrates the price competition into the bidding competition and investigates the endogenous bidding incentives of advertisers with different competitive strengths. Surprisingly, we find that an advertising position with a better exposure may not always be profitable for the advertisers with competitive advantage, even if it is cost free. We also show that the bidding outcome might not align with the relative competitive strength. The third essay further considers the effects of organic listing as a competing information source on the sponsored bidding competition and the outcome performances in search advertising. It provides answers to questions such as whether and why advertisers with sufficient exposure from the organic list may still be willing to bid for top sponsored positions, and how the existence of organic listing affects search engine's revenue, consumer surplus, and social welfare.
Author: William Daniel Moriarty
Publisher:
ISBN:
Category : Advertising
Languages : en
Pages : 618
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Book Description
