Endogenous Expectations Management with Network Effects: A Note

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Kangsik Choi ◽  
Seonyoung Lim
Keyword(s):  
Network Effects ◽  
Dominant Strategy ◽  
Cournot Competition ◽  
Pareto Efficiency ◽  
Bertrand Competition ◽  
Expectations Management ◽  
Intensity Of Competition ◽  
Commitment Device

Abstract We examine the endogenous choice of commitment device to consumers’ expectations with network effects. Under Cournot competition, we show that choosing commitment to expectations for each firm is a dominant strategy regardless of the strength of network effects. However, under Bertrand competition, three types of commitment with both/no commitment/multiple emerge in equilibrium depending on the strength of network effects. Thus, we obtain different Pareto efficiency between Bertrand and Cournot competition, depending on the intensity of competition.

scholarly journals Retail outsourcing strategy in Cournot & Bertrand retail competitions with economies of scale

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Mingxia Li ◽  
Kebing Chen ◽  
Shengbin Wang
Keyword(s):  
Economies Of Scale ◽  
Market Competition ◽  
Equilibrium Structure ◽  
Dominant Strategy ◽  
Chain Structure ◽  
Cournot Competition ◽  
Channel Structure ◽  
Bertrand Competition ◽  
Substitutable Products ◽  
Competition Mode

<p style='text-indent:20px;'>This paper investigates a manufacturer's retail outsourcing strategies under different competition modes with economies of scale. We focus on the effects of market competition modes, economies of scale and competitor's behavior on manufacturer's retail outsourcing decisions, and then we develop four game models under three competition modes. Firstly, we find the channel structure where both manufacturers choose retail outsourcing cannot be an equilibrium structure under the Cournot competition. The Cournot competition mode is less profitable to the firm than the Bertrand competition when the products are complements. Secondly, under the hybrid Cournot-Bertrand competition mode, there is only one equilibrium supply chain structure where neither manufacturer chooses retail outsourcing, when the substitutability and complementarity levels are not sufficiently high. In addition, setting price (quantity) contracts as the strategic variables is the dominant strategy for the direct-sale manufacturer who provides complementary (substitutable) products. Thirdly, both competitive firms will benefit from the situation where they choose the same competition mode. When the products are substitutes (complements), both of them choose the Cournot (Bertrand) competition mode. Finally, we show that the economies of scale have little impact on the equilibrium of the outsourcing structure but a great impact on the competition mode equilibrium.</p>

Cash Holdings, Competition, and Innovation

2016 ◽  
Vol 51 (6) ◽  
pp. 1823-1861 ◽  
Author(s):  
Evgeny Lyandres ◽  
Berardino Palazzo
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Cash Holding ◽  
Product Markets ◽  
Innovative Firms ◽  
Uncertain Structure ◽  
Cash Policies ◽  
Intensity Of Competition ◽  
Commitment Device

We demonstrate theoretically and empirically that strategic considerations are important in shaping the cash policies of innovative firms. In our model, firms compete in product markets with uncertain structure using cash as a commitment device to invest in innovation. We show that firms’ equilibrium cash holdings are related to the expected intensity of competition. The sign and magnitude of this relation depends on firms’ financial constraints. Consistent with the strategic motive for hoarding cash, we show that firms’ cash holdings are negatively affected by their rivals’ cash-holding choices, even more so when competition is expected to be intense.

STRATEGIC CHOICE BETWEEN PROCESS AND PRODUCT INNOVATION UNDER DIFFERENT COMPETITIVE REGIMES

2010 ◽  
Vol 12 (02) ◽  
pp. 139-159 ◽  
Author(s):  
LUIGI FILIPPINI ◽  
GIANMARIA MARTINI
Keyword(s):  
Product Innovation ◽  
Strategic Choice ◽  
Innovation Adoption ◽  
Vertical Differentiation ◽  
New Product ◽  
Cournot Competition ◽  
Bertrand Competition ◽  
Duopoly Model ◽  
Innovation Type ◽  
Asymmetric Equilibrium

This paper investigates the strategic choice between introducing a process or a product innovation in a duopoly model with vertical differentiation, comparing the outcomes in case of Bertrand and Cournot competition. It is shown that under both competitive regimes three equilibria in innovation adoption may arise: two symmetric equilibria, where firms select the same innovation type, and one asymmetric equilibrium. The competitive regime has an impact on the features of the asymmetric equilibrium, since in case of Bertrand competition, the high (low) quality firm chooses a product (process) innovation, while firms make the opposite choices in case of Cournot competition. The presence of a leapfrogging effect (only in the Cournot case) explains these different outcomes. Last, we find that the Cournot competitors tend to favor the introduction of a new product in comparison with the Bertrand competitors.

scholarly journals Certification of Environmental Corporate Social Responsibility Activities in Differentiated Duopoly Market

2017 ◽  
Vol 2017 ◽  
pp. 1-7
Author(s):  
Liuwei Zhao ◽  
JianGuo Du
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Nongovernmental Organizations ◽  
Cournot Competition ◽  
Bertrand Competition ◽  
Environmental Certification ◽  
Social Standard ◽  
Environmental Nongovernmental Organizations ◽  
Corporate Social ◽  
Duopoly Market

In this paper, by environmental Nongovernmental Organizations certification we research corporate social responsibility in the impacts of competition structures on corporate incentives. The research explained that, to induce firms to adopt certified environmental corporate social responsibility, the certifier will set a standard lower than the optimal one. The environmental certification corporate social standard is equal to that in Cournot competition and Bertrand competition, but Bertrand competition structure will make the firm get more benefits than Cournot competition. In addition, the research also shows that firms and consumers all will get benefit from environmental corporate social responsibility.

Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Qian Liu ◽  
Leonard F. S. Wang
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Cournot Competition ◽  
Bertrand Competition ◽  
Quantity Competition ◽  
Decentralized Bargaining ◽  
Cournot And Bertrand Competition

AbstractAllowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.

scholarly journals Optimal Product R&D Policies with Endogenous Quality Choices and Unilateral Spillover

2016 ◽  
Vol 16 (1) ◽  
pp. 365-391 ◽  
Author(s):  
Yumiko Taba
Keyword(s):  
Research And Development ◽  
Spillover Effects ◽  
Cournot Competition ◽  
Bertrand Competition ◽  
Technology Spillover ◽  
High Quality ◽  
Endogenous Quality ◽  
Tax Subsidy ◽  
Optimal Policies

Abstract This study derives non-cooperative and cooperative optimal product research and development (R&D) policies of a country with a high-quality firm and a country with a low-quality firm in the presence of technology spillover under Cournot and Bertrand competitions in an international duopoly. When the respective governments determine their R&D policies non-cooperatively, optimal policies for both countries involve an R&D tax (subsidy) if spillover is large (small). When the governments choose their R&D policies cooperatively, a tax is always optimal for the country with low-quality firm and a subsidy (tax) is optimal for the country with high-quality firm if spillover is large (small). In addition, we show that the non-cooperative optimal product R&D Policy is tax for a wider range of spillover effects under Cournot competition, compared to the case of Bertrand competition.

Collusion in Expectations Management with Network Effects

2020 ◽  
Vol 38 (3) ◽  
pp. 1-14
Author(s):  
Kangsik Choi ◽  
Seonyoung Lim
Keyword(s):  
Network Effects ◽  
Expectations Management

Environmental Taxes in Duopoly with Soft Capacity Constraints

2014 ◽  
Vol 14 (4) ◽  
pp. 1569-1584
Author(s):  
Henrik Vetter
Keyword(s):  
Price Competition ◽  
Cournot Competition ◽  
Capacity Constraints ◽  
Environmental Taxes ◽  
Bertrand Competition ◽  
Environmental Tax ◽  
Unit Tax ◽  
Qualitative Nature

Abstract This paper examines an environmental tax when duopolistic firms engage in capacity-price competition. Under soft capacity constraints, the equilibrium ranges from Bertrand competition to Cournot competition, depending upon parameters. It is shown that a unit tax potentially changes the qualitative nature of equilibrium. That is, the type of tax affects the mode of competition between firms. This effect gives rise to the result that a unit tax is sometimes an inefficient instrument. The explanation is that the tax that leads to the first-best under Cournot competition will in fact sustain Bertrand competition, and vice versa.

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