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Sequential Quality Competition in the Restaurant Industry: Effects of Restaurants’ Reputation

In: Transcending Borders in Tourism Through Innovation and Cultural Heritage

Author

Listed:
  • Fernanda A. Ferreira

    (Applied Management Research Unit (UNIAG))

  • Flávio Ferreira

    (Applied Management Research Unit (UNIAG))

  • Paula Odete Fernandes

    (Instituto Politécnico de Bragança)

Abstract

In the present paper, a model has been considered, in which two asymmetric restaurants, with respect to their reputations, compete, non-cooperatively, on both quality and quantities. First, at the quality stage, restaurants take their decisions sequentially, with the small restaurant acting as a leader. Then, at the quantity stage, both restaurants take their decisions simultaneously. The aim is twofold: the first is to compute the decisions that give higher profits and the second is to study the effects of the difference of restaurants’ reputation. One of the main results of the research is that the reputation is an important feature, influencing the comparative results of the two restaurants in qualitative terms. In fact, reputation difference decreases the profits of the small (leader) restaurant, while it can either increase or decrease the profits of the large (follower) restaurant. However, less reputation difference between the restaurants decreases social welfare.

Suggested Citation

  • Fernanda A. Ferreira & Flávio Ferreira & Paula Odete Fernandes, 2022. "Sequential Quality Competition in the Restaurant Industry: Effects of Restaurants’ Reputation," Springer Proceedings in Business and Economics, in: Vicky Katsoni & Andreea Claudia Şerban (ed.), Transcending Borders in Tourism Through Innovation and Cultural Heritage, pages 779-789, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-92491-1_46
    DOI: 10.1007/978-3-030-92491-1_46
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    More about this item

    Keywords

    Restaurants’ reputation; Healthy food; Duopoly;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z30 - Other Special Topics - - Tourism Economics - - - General

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