Quality Improvement to Meet Competitive Fringe
We investigate what kind of competitive pressure induces existing firms to engage in more intensive innovation activities. We examine two types of competitive pressure: a price decrease in competitive fringe firms and a quality improvement therein. We use an oligopoly model with vertical differentiation to investigate this question. We show that a decrease in the exogenous price of competitive firms induces the two existent leading firms (one high-quality firm and one mid-quality firm) to engage in quality investments more if the ex ante quality level of the high quality product is large enough; otherwise, only the mid-quality firm engages more in quality investment. We also show that an increase in the exogenous quality level of competitive firms diminishes the incentive of the mid-quality firm to engage in quality investments.
Year of publication: |
2012-08
|
---|---|
Authors: | Matsushima, Noriaki ; Liu, Ren-Jye |
Institutions: | Institute of Social and Economic Research (ISER), Osaka University |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Product differentiation and entry timing in a continuous time spatial competition model
Ebina, Takeshi, (2014)
-
Strategic dual sourcing as a driver for free revealing of innovation
Matsushima, Noriaki, (2015)
-
Vertical Separation as a Defense against Strong Suppliers
Matsushima, Noriaki, (2009)
- More ...