Price Competition and Setup Cost
Keyword(s):
Few studies analyze the endogenous emergence of price competition in a new product market. This paper analyzes two differentiated products, an existing product and a newly introduced substitutable product, and investigates conditions under which a price competition endogenously emerges in a new product market in the context of a choice between engaging in price competition and holding price leadership. We demonstrate that Bertrand price competition emerges when the setup cost for the new product is high enough. This result implies that government policies reducing setup costs such as subsidies could change the type of competition to price leadership in a new product market.
1994 ◽
Vol 23
(2)
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pp. 125-139
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2018 ◽
Vol 59
(4)
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pp. 1681-1731
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Keyword(s):
2018 ◽
Vol 56
(1)
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pp. 37-56
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2005 ◽
Vol 22
(2)
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pp. 159-182
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1999 ◽
Vol 32
(4)
◽
pp. 1069
◽
2011 ◽
Vol 23
(1)
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pp. 85-97
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Keyword(s):
Feasting on Leftovers: Strategic Use of Shortages in Price Competition Among Differentiated Products
2010 ◽
Vol 12
(1)
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pp. 140-161
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