QUANTITY PRECOMMITMENT AND BERTRAND COMPETITION YIELD COURNOT OUTCOMES: A CASE WITH PRODUCT DIFFERENTIATION*

1997 ◽  
Vol 36 (68) ◽  
pp. 14-22 ◽  
Author(s):  
XIANGKANG YIN ◽  
NG YEW-KWANG
Keyword(s):  
Product Differentiation ◽  
Bertrand Competition

scholarly journals Product Differentiation in a Vertical Structure

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Tien-Der Han ◽  
M. Emranul Haque ◽  
Arijit Mukherjee
Keyword(s):  
Product Differentiation ◽  
Vertical Structure ◽  
Returns To Scale ◽  
Pricing Strategy ◽  
Bertrand Competition ◽  
Price Determination ◽  
Free Entry ◽  
Horizontal Product Differentiation ◽  
Goods Market ◽  
Cournot And Bertrand Competition

AbstractWe consider final goods producers’ preference for horizontal product differentiation in the presence of strategic input price determination. Final goods producers may not prefer maximal differentiation but may prefer moderate differentiation under both Cournot and Bertrand competition in the final goods market if product differentiation does not increase the market size significantly and there is either free entry in the input market or the input supplier has increasing returns to scale technology. Thus, we provide a new rationale for moderate product differentiation. Our reasons are different from the existing reasons of mixed pricing strategy, endogenous leadership, no-buy option for the consumers and the relative performance incentive schemes.

scholarly journals Pay-What-You-Want in Competition

2019 ◽  
Vol 20 (1) ◽  
Author(s):  
Margaret Samahita
Keyword(s):  
Market Structure ◽  
Product Differentiation ◽  
Bertrand Competition ◽  
Product Characteristics ◽  
Surplus Sharing ◽  
Pay What You Want ◽  
High Level ◽  
Pricing Schemes

AbstractThis paper presents an analysis of Pay-What-You-Want (PWYW) in competition which explains its entry and limited spread in the market. Sellers choose their pricing schemes sequentially while consumers share their surplus. The profitability and popularity of PWYW depend not only on consumers’ preferences, but also on market structure, product characteristics and sellers’ strategies. While there is no PWYW equilibrium, given a sufficiently high level of surplus-sharing and product differentiation, PWYW is chosen by later entrants to avoid Bertrand competition. The equilibrium results and their market characteristics are consistent with empirical examples of PWYW.

scholarly journals Brand premia driven by perceived vertical differentiation in markets with information disparity and optimistic consumers

2021 ◽  
Author(s):  
A. Cavaliere ◽  
G. Crea
Keyword(s):  
Product Quality ◽  
Product Differentiation ◽  
Vertical Differentiation ◽  
Perfect Information ◽  
Bertrand Competition ◽  
High Quality ◽  
The Real ◽  
Equilibrium Prices

AbstractWe have considered a duopoly with perceived vertical differentiation, information disparity and optimistic consumers. When firms compete for informed and uninformed consumers, the former contribute to raise product quality, while equilibrium prices increase with optimistic misperception of the latter, in our first equilibrium. Brand premium includes a quality premium and a misperception rent. In our second equilibrium, informed consumers buy low-quality goods and minimum product differentiation without Bertrand competition occurs. The brand premium is just a misperception rent, however, an increase of the informed consumers share implies price re-balancing and rent reduction. Consumers externalities arise in both equilibria. Firms compete only for informed consumers within our third and fourth equilibrium, as uninformed ones are passive and represent a captive market. Uninformed consumers in one case are overoptimistic, they buy the high quality good and can be cheated in equilibrium. Uninformed consumers approach the real quality differential in the fourth equilibrium, and the model reduces to standard vertical differentiation with perfect information.

Patents versus rewards: the implications of production inefficiency

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Aniruddha Bagchi ◽  
Arijit Mukherjee
Keyword(s):  
Product Differentiation ◽  
Optimal Taxation ◽  
Patent Protection ◽  
Bertrand Competition ◽  
Tax Rate ◽  
Marginal Costs ◽  
Tax Subsidy ◽  
Subsidy Scheme ◽  
The Government ◽  
Cournot And Bertrand Competition

AbstractIt is believed that if there is no informational asymmetry between firms and the government, firms could be remunerated for innovation using optimal taxation rather than patents. We show that under reasonable conditions (such as the government’s inability to customise the tax rate for each firm), patent protection is preferable to a tax/subsidy scheme if the marginal costs of the imitators are sufficiently higher than that of the innovator. Otherwise, the tax/subsidy scheme is preferable. These results hold under Cournot and Bertrand competition with product differentiation, but not for the case of Bertrand competition with homogeneous products. We rationalise these findings as the results of a trade-off between the distortions induced by monopoly under patents and production inefficiency under the tax/subsidy scheme.

Industry Relocation and Manufacturing Clusters Upgrading

2010 ◽  
Vol 102-104 ◽  
pp. 786-790
Author(s):  
Hua Ping Sun
Keyword(s):  
Product Differentiation ◽  
Bertrand Competition ◽  
Development Mode ◽  
Short Term ◽  
The Sustainable Development ◽  
Spatial Production ◽  
Industrial Relocation ◽  
Long Run ◽  
Equipment Manufacturing ◽  
The Competitiveness Of Enterprises

Industrial relocation is conducive to spatial production specialization in the age of information network and economic globalization. Although it will affect the regional industrial competitiveness and employment levels in the short term, in the long run it is conducive to the sustainable development of regional manufacturing clusters. Based on the location model of the micro-enterprise perspective, the paper concluded that: Cournot competition will cause spatial agglomeration, while Bertrand competition leads to industrial relocation. At the present stage, the development mode of manufacturing clusters in Zhejiang is close to Bertrand competition. To achieve the restructuring and upgrading of manufacturing clusters, it is necessary to implement desiring policies to promote the competitiveness of enterprises out of the Bertrand competition, and to increase R&D inputs to enhance the degree of product differentiation. Finally, the paper did an empirical study with an example of Taizhou sewing equipment manufacturing cluster.

Product differentiation and populistic entry strategies in a mortgage market with Bertrand competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Trond Arne Borgersen
Keyword(s):  
Interest Rate ◽  
Product Differentiation ◽  
Mortgage Market ◽  
Bertrand Competition ◽  
Content Type ◽  
Mortgage Rate ◽  
Funding Cost ◽  
Mortgage Rates ◽  
Entry Strategy ◽  
Strategic Market

PurposeThe purpose of this paper is to analyse the interaction between a profit maximising mortgagor and a newcomer to a mortgage market with Bertrand competition where the newcomer has a populistic entry strategy and undercuts mortgage market rates. The intention of the paper is to relate the populistic entry strategy to mortgage market characteristics and the strategic market position of both the established mortgagor and the newcomer in question.Design/methodology/approachThe paper analyses a mortgage market by combining the behaviour of a profit maximising mortgagor with that of a newcomer to the mortgage market which has a populistic entry strategy and does not maximise profits. The short-run market solution provides comparative statics on the strategic market position of both the established mortgagor and the newcomer to the mortgage market during the entry phase both related to product differentiation and to price mirroring and undercutting of mortgage rates.FindingsThe model finds a mortgage market solution where a lower mortgage rate helps the newcomer gain a customer base. As the newcomer's strategy to mirror prices makes it unable to pass-through funding cost to its mortgage rate, the strategy is unsustainable over time. The established mortgagor has a strategically beneficial position as the mortgage market rates only relate to its funding cost. Unless the newcomer has a funding cost advantage, the established mortgagor has a higher interest rate margin. Differentiation impacts the newcomers’ interest rate margin positively. If the newcomer lacks a funding cost advantage, there is a critical mirroring rate that ensures it a higher interest rate margin. The higher the newcomers’ own funding cost, the higher is the upper bound for price mirroring, relating market entry to a small undercutting of mortgage rates and a mortgage market with weak competition. The funding cost of the established mortgagor pulls pricing in the opposite direction, allowing for a lower mirroring rate and tougher mortgage market competition during entry.Originality/valueThe paper aims to contribute to the understanding of market equilibrium in the absence of profit maximising behaviour. Framing a mortgage market in terms of a duopoly where a newcomer enters with a populistic entry strategy offering a lower mortgage rate and a mortgage product with a different loan-to-value (LTV) ratio, a novel mortgage market case comes about. The populistic entry strategy produces an augmented reaction curve, crucial for the mortgage market rates.

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