Price competition when consumer behavior is characterized by conformity or vanity

Grilo, Isabel; Shy, Oz; Thisse, Jacques‐François

doi:10.1016/s0047-2727(00)00115-8

Cited by 138 publications

(115 citation statements)

References 11 publications

Supporting

Mentioning

109

Contrasting

Order By: Relevance

“…We follow an approach similar to Grilo et al (2001) to incorporate network effects in our basic model with symmetric costs: Two incompatible networks are formed by the clients of the firms where each client profits from the size of the network he belongs to. This effect may be due to, e.g., an enhanced availability of complementary products or direct opportunities for interaction.…”

Section: Network Effectsmentioning

confidence: 99%

See 1 more Smart Citation

Increasing Dominance - The Role of Advertising, Pricing and Product Design

Kretschmer

Rösner²

2010

SSRN Journal

View full text Add to dashboard Cite

Despite the empirical relevance of advertising strategies in concentrated markets, the economics literature is largely silent on the effect of persuasive advertising strategies on pricing, market structure and increasing (or decreasing) dominance. In a simple model of persuasive advertising and pricing with differentiated goods, we analyze the interdependencies between ex-ante asymmetries in consumer appeal, advertising and prices. Products with larger initial appeal to consumers will be advertised more heavily but priced at a higher level -that is, advertising and price discounts are strategic substitutes for products with asymmetric initial appeal. We find that the escalating effect of advertising dominates the moderating effect of pricing so that post-competition market shares are more asymmetric than pre-competition differences in consumer appeal. We further find that collusive advertising (but competitive pricing) generates the same market outcomes, and that network effects lead to even more extreme market outcomes, both directly and via the effect on advertising.

show abstract

Section: Network Effectsmentioning

confidence: 99%

“…The way in which initial market share asymmetries enter the model is inspired by Grilo et al (2001), who build their analysis of price competition with positive and negative network effects around the idea of locational advantage in a Hotelling model.…”

Section: Introductionmentioning

confidence: 99%

Increasing Dominance - The Role of Advertising, Pricing and Product Design

Kretschmer

Rösner²

2010

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Secondly, even though it is known that in general there may exist non-linear strategies that solve linear-quadratic differential games, such strate-1 Note that a different interpretation, in which the negative consumption externalities follow from social and not technological reasons, is equally consistent with our model. In this interpretation two firms produce horizontally differentiated durable goods and consumers' behavior is characterized by vanity and subject to snob effects (for a static model along these lines see Grilo, Shy and Thisse (2001)). A fixed fraction of randomly chosen durable goods in the hands of the consumers have to be replaced at each point of time.…”

Section: Introductionmentioning

confidence: 99%

“…Our paper is related to a paper by Grilo, Shy and Thisse (2001) who deal, in a static framework, with price competition when consumer behavior is characterized by conformity or vanity. They analyze the case where the pleasure of consuming a good is affected for social reasons by the consumption choices of the others.…”

Section: Introductionmentioning

confidence: 99%

Dynamic duopoly with congestion effects

Laussel¹,

Montmarin²,

Long³

2004

International Journal of Industrial Organization

View full text Add to dashboard Cite

CIRANOLe CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le Résumé / AbstractOn étudie la concurrence entre deux firmes qui vendent des biens ou des services durables sous la condition d'encombrement. À chaque instant, des clients nouveaux achètent une unité du bien, en comparant les prix et les taux d'encombrement futur. On caractérise l'équilibre markovien de ce jeu. L'existence des externalités négatives rend la concurrence moins féroce. On montre que la firme qui a la plus grande capacité a, dans l'état stationnaire, une plus grande part de marché, un prix plus élevé, et un taux d'encombrement plus faible. Le prix du bien d'une nouvelle firme diminue continuellement, tandis que celui de son rival en exercise monte. La vitesse de convergence est une fonction croissante de l'effet d'encombrement.

show abstract

“…Their model is dynamic, however, whereas our model is not. Finally, a model similar in spirit is Grilo, Shy and Thisse (2001). They examine a model of horizontal product differentiation that introduces a consumption externality.…”

mentioning

confidence: 99%

Price Competition and Product Differentiation when Goods have Network Effects

Conrad

2006

German Economic Review

View full text Add to dashboard Cite

The objective of our approach is to develop a model that captures horizontal product differentiation under environmental awareness with price competition whereby environmentally friendly products are costlier to produce. As an example, we refer to automobile producers offering cars with a gasoline-powered engine and one with a natural gas-powered engine. The network of petrol stations provides the complementary good. We use a two-stage game in prices and characteristics to analyse the market structure. In order to find out whether a private decision on the type of engine coincides with a socially optimal product differentiation, we determine the position of the two types of engine by a welfare-maximizing authority. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

show abstract

Price competition when consumer behavior is characterized by conformity or vanity

Cited by 138 publications

References 11 publications

Increasing Dominance - The Role of Advertising, Pricing and Product Design

Increasing Dominance - The Role of Advertising, Pricing and Product Design

Dynamic duopoly with congestion effects

Price Competition and Product Differentiation when Goods have Network Effects

Contact Info

Product

Resources

About