Price Competition in a Differentiated Products Duopoly Under Network Effects PDF Download
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Author: Krina Griva
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 26
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Book Description
Author: Krina Griva
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 26
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Author: Irina Suleymanova
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Author: Itay P. Fainmesser
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
This paper studies the practice of influencer marketing in oligopoly markets and its effect on market efficiency. We develop a duopoly model in which firms sell horizontally differentiated products. Consumers are influenced by other consumers' choices, and some consumers are more influential than others. Firms' influencer marketing strategy involves discovering the influence of a subset of consumers and price discriminating based on this information.In equilibrium, firms subsidize consumers whose influence is above average and charge premia to below average influential consumers; the equilibrium premia/discounts depend on the strength of network effects and the level of information that firms have on consumers' influence. From a normative perspective, we show that influencer marketing leads to inefficient consumer-product matches. Firms' investments in discovering consumers' networks are strategic complements, leading to a race for information acquisition that erodes total surplus and firms' profits but increases consumer surplus.
Author: Ningyuan Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 90
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We consider two firms selling products to a market of network-connected customers. Each firm is selling one product and the two products are substitutable. The customers make purchases based on the multinomial logit model and the firms compete for their purchasing probabilities. We characterize possible Nash equilibria for homogeneous network interactions and identical firms: when the network effects are weak, there is a symmetric equilibrium that the two firms evenly split the market; when the network effects are strong, there exist two asymmetric equilibria additionally, in which one firm dominates the market; interestingly, when the product quality is low and the network effects are neither too weak nor too strong, the resulting market equilibrium is never symmetric although the firms are ex ante symmetric. We extend these results along multiple directions. First, when the products have heterogeneous qualities, the firm selling inferior product can still retain market dominance in equilibrium due to the strong network effects. Second, when the network effects are heterogeneous, customers with higher social influences or larger price sensitivities are more likely to purchase either product in the symmetric equilibrium. Third, when the network consists of two communities, market segmentation may arise. Fourth, we extend to the dynamic game when the network effects build up over time to explain the first-mover advantage.
Author: Lijia Ge
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this paper, we formulate a differential game model to investigate firms' competition in both price and product R&D. The significant features of our research include: (i) incorporating the factor of network effects into the framework of continuous dynamic competition; (ii) considering the consumers' adaptive learning about the network size in the spirit of behavioral economics. Our analysis mainly suggests: (i) The network effects and consumers' adaptive learning comprehensively have negative effects on the result of price competition but has nothing to do with the result of R&D competition under duopoly, which is not true as the number of firms increases; (ii) the incentive to acquire competitors' state information is increasing with the intensity of network effects and the consumers' learning speed; (iii) when we consider the competition among more than three firms under feedback information structure, the competition intensity has negative effect on the steady-state quality stock; (iv) in a market where the consumers show strong price sensitivity, the product quality is under-provided compared with the first-best optimal level regardless of the choice of solution concept.
Author: Richard Schmalensee
Publisher: North Holland
ISBN:
Category : Business & Economics
Languages : en
Pages : 1002
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Book Description
Determinants of firm and market organization; Analysis of market behavior; Empirical methods and results; International issues and comparision; government intervention in the Marketplace.
Author: John Beath
Publisher: Cambridge University Press
ISBN: 9780521335522
Category : Business & Economics
Languages : en
Pages : 220
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Book Description
There are few industries in modern market economies that do not manufacture differentiated products. This book provides a systematic explanation and analysis of the widespread prevalence of this important category of products. The authors concentrate on models in which product selection is endogenous. In the first four chapters they consider models that try to predict the level of product differentiation that would emerge in situations of market equilibrium. These market equilibria with differentiated products are characterised and then compared with social welfare optima. Particular attention is paid to the distinction between horizontal and vertical differentiation as well as to the related issues of product quality and durability. This book brings together the most important theoretical contributions to these topics in a succinct and coherent manner. One of its major strengths is the way in which it carefully sets out the basic intuition behind the formal results. It will be useful to advanced undergraduate and graduate students taking courses in industrial economics and microeconomic theory.
Author: Michael Kopel
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We show that a frequently used direct demand system with product differentiation in a duopoly market generates unexpected effects of increasing the substitutability of firms' products on prices, outputs, profits and welfare. Using the original demand system introduced by Bowley (The Mathematical Groundwork of Economics, Oxford, Oxford University Press, 1924) as a reference, we argue that this alternative model does not capture a consumer's taste for variety. Moreover, we demonstrate that positive values for the parameter which represents cross-price effects in the alternative demand system corresponds to the regime of complementary products in the original Bowley model. As a consequence, for increasing values of this parameter--meant to capture increasing competition in the usual sense--prices do not converge towards marginal costs and profits do not vanish. Finally, we study a duopoly with international transfer pricing and demonstrate that conflicting policy conclusions are derived depending on which of the models is used to capture demand.
Author: Marco Tolotti
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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When dealing with consumer choices, social pressure plays a crucial role; also in the context of market competition, the impact of network/social effects has been largely recognized. However, the effects of firm-specific social recognition on market equilibria has never been addressed so far. In this paper, we consider a duopoly where competing firms are differentiated solely by the level of social (or network) externality they induce on consumers' perceived utility. We fully characterize the subgame perfect Nash equilibria in locations, prices and market shares. Under a scenario of weak social externality, the firms opt for maximal differentiation and the one with the highest social recognition has a relative advantage in terms of profits. Surprisingly, this outcome is not persistent; excessive social recognition may lead to adverse coordination of consumers: the strongest firm can eventually be thrown out of the market with positive probability. This scenario is related to a Pareto inefficient trap of no differentiation.
