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

Fernanda A. Ferreira (), Flávio Ferreira () and Paula Odete Fernandes ()
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Fernanda A. Ferreira: Applied Management Research Unit (UNIAG)
Flávio Ferreira: Applied Management Research Unit (UNIAG)
Paula Odete Fernandes: Instituto Politécnico de Bragança

A chapter in Transcending Borders in Tourism Through Innovation and Cultural Heritage, 2022, pp 779-789 from Springer

Abstract: 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.

Keywords: Restaurants’ reputation; Healthy food; Duopoly (search for similar items in EconPapers)
JEL-codes: L83 Z30 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-92491-1_46

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DOI: 10.1007/978-3-030-92491-1_46

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