MARKET ENTRY, PRODUCT QUALITY AND PRICE COMPETITION

Sameer Mathur and Prem Prakash Dewani
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Sameer Mathur: Department of Marketing, Indian Institute of Management, Lucknow, India
Prem Prakash Dewani: Department of Marketing, Indian Institute of Management, Lucknow, India

Studies in Business and Economics, 2015, vol. 10, issue 2, 62-82

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.

Keywords: Market entry; quality, pricing, marketing, strategy, competition (search for similar items in EconPapers)
Date: 2015
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