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Market Entry, Product Quality And Price Competition

Author

Listed:
  • MATHUR Sameer

    (Department of Marketing, Indian Institute of Management, Lucknow, India)

  • DEWANI Prem Prakash

    (Department of Marketing, Indian Institute of Management, Lucknow, India)

Abstract

We study an entrant firm’s product quality choice and the price competition arising between the entrant and the incumbent firm. We show that the entrant firm should introduce a relatively higher (lower) quality than the incumbent firm when the consumers’ valuation for quality is sufficiently large (small). We also study how the incumbent firm modifies its price in response to the ensuing price competition. We find that the incumbent firm should decrease its price. We also profile how the incumbent firm’s price non-linearly depends on consumers’ valuation for quality.

Suggested Citation

  • MATHUR Sameer & DEWANI Prem Prakash, 2015. "Market Entry, Product Quality And Price Competition," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(2), pages 62-82, August.
    • Handle: RePEc:blg:journl:v:10:y:2015:i:2:p:62-82
    as

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    References listed on IDEAS

    as
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