Price and quality competition: The effect of differentiation and vertical integration

Testing the Alchian–Allen theorem for three goods using the pseudo Poisson model

“…That market size can affect the relative demand is first postulated by Melitz and Ottaviano (2008) as "…larger markets exhibit tougher competition" (Melitz & Ottaviano, 2008, p. 312). This result, coupled with findings in Banker, Khosla, and Sinha (1998), Das, Handfield, Calantone, and Ghosh (2000), and Matsubayashi (2007) that increased competition, leads to lower quality levels if, "… the customer demand exhibits a relatively low-quality responsiveness" (Banker et al, 1998(Banker et al, , p. 1191, allows us to hypothesize that increased market size will lower the relative quality of the coffee imports. We also include the exchange rate as explanatory variable.…”

Quality and entry deterrence

“…Even in these papers, deterrence is possible with modest quality levels and consequently cost values due to the nature of the vertical differentiation; and hence, the incumbent's strategy is mainly driven by the fixed entry cost. Contrary to these papers, we adopt the same approach as Banker et al (1998), Tsay and Agrawal (2000), Matsubayashi (2007), Allon and Federgruen (2007), and treat the quality decision as a ''demand-enhancing effort'' (Tsay & Agrawal, 2000) in a non-address product differentiation model. A higher quality, ceteris paribus, always produces a higher demand, but has significant cost consequences -in both investment and marginal costs/savings.…”

“…The quality/service decisions of a firm have been the focus of a vast literature in operations management, marketing, and economics (e.g., Allon & Federgruen, 2007;André, González, & Porteiro, 2009;Banker, Khosla, & Sinha, 1998;Bernstein & Federgruen, 2004;Federgruen & Yang, 2009;Karmarkar & Pitbladdo, 1997;Lacourbe, Loch, & Kavadias, 2009;Matsubayashi, 2007;Moorthy, 1988;Nair & Narasimhan, 2006;Narasimhan & Mendez, 2001;Paulson Gjerde & Slotnick, 2004;Tsay & Agrawal, 2000;YaylaKüllü, Parlaktürk, & Swaminathan, 2013). Different timelines (simultaneous versus dynamic) and relationships (competitive versus collaborative) have been analyzed to explain the role quality/ service plays in competition intensity in the market, in coordination problems, in inventory and capacity decisions, in product differentiation and vertical integration of firms, etc.…”

Research on supply chain versus supply chain competition with product quality and price dependent demand

“…Recently, the product quality management in supply chain has attracted more attentions from scholars. Matsubayashi [1] studies an instance of price and quality competition between firms as seen in the recent Internet market. It shows that product differentiation can increase the profit of enterprise and consumer welfare in a quality-sensitive market.…”