Hawks and doves in segmented markets: a formal approach to competitive aggressiveness

Claude D’aspremont,, Rodolphe Dos Santos Ferreira and Jacques Thépot
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Claude D’aspremont,: Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)
Authors registered in the RePEc Author Service: Claude d'Aspremont

No 2007078, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one related to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the relative implicit price of the former constraint, is then endogenous and may be taken as a parameter to characterize the set of equilibria. A further step consists in supposing that competitive aggressiveness is controlled by each firm through its manager hiring decision, in a preliminary stage of a delegation game. When competition is exogenously intensified, through higher product substitutability or through larger relative size of the contested market segment, competitive aggressiveness is decreased at the subgame perfect equilibrium. This decrease partially compensates for the negative effect on profitability of more intense competition.

Date: 2007-11-01
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Related works:
Working Paper: Hawks and doves in segmented markets: A formal approach to competitive aggressiveness (2012)
Working Paper: Hawks and doves in segmented markets: a formal approach to competitive aggressiveness (2007)
Working Paper: Hawks and doves in segmented markets: A formal approach to competitive aggressiveness (2007)
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