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.

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.

Price determination in goods market

2021 ◽  
pp. 97-121
Author(s):  
Zhang Yishan ◽  
Yu Weisheng ◽  
Wang Guangliang
Keyword(s):  
Price Determination ◽  
Goods Market

scholarly journals Indirect Network Effects and Adoption Externalities

2008 ◽  
Vol 7 (3) ◽  
Author(s):  
Jeffrey Church ◽  
Neil Gandal ◽  
David Krause
Keyword(s):  
Network Effects ◽  
Returns To Scale ◽  
Social Benefit ◽  
Software Systems ◽  
Free Entry ◽  
Private Benefit ◽  
Increasing Returns To Scale ◽  
Indirect Network Effects ◽  
The Social ◽  
Consumption Benefits

Can indirect network effects lead to adoption externalities? If so, when? We show that in markets where consumption benefits arise from hardware/software systems, adoption externalities will occur when there are (i) increasing returns to scale in the production of software, (ii) free entry in software, and (iii) consumers have a preference for software variety. The private benefit of the marginal hardware purchaser is less than the social benefit since the marginal hardware purchaser does not internalize the welfare improving response of the software industry, particularly the increase in software variety, on inframarginal purchasers when the market for hardware expands.

scholarly journals Cournot and Bertrand Competition in the Software Industry

2017 ◽  
Vol 2017 ◽  
pp. 1-10
Author(s):  
Luciano Fanti ◽  
Domenico Buccella
Keyword(s):  
Social Welfare ◽  
Software Industry ◽  
Bertrand Competition ◽  
The Social ◽  
Cournot And Bertrand Competition

In a software industry based on a platform firm and two firms producing differentiated applications complementary to the platform, we investigate the effects on profits and welfare of the choice of different contracts (price versus quantity) by the application firms. In contrast to the traditional result, (1) equilibrium profits are higher under Cournot or Bertrand competition depending upon the degree of complementarity between platform and application producers as well as the degree of substitutability between applications; (2) the social welfare may be higher under Cournot when the application products are highly substitutable.

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