Quality and price competition in a duopoly under product liability and traceability

Jianchang Fan, Nana Wan, Zhun Li, H. Fu
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引用次数: 1

Abstract

Our study aims to explore how traceability affects quality and price competition in a duopoly. A theoretical model is developed in which both enterprises are liable to recall low-quality products identified by traceability and compensate consumers for the disutility caused by unidentified low-quality products. The equilibrium results are derived by determining the optimal product quality and sales price decisions. The key findings are highlighted below. (1) Traceability affects product quality primarily through the expected social cost (the sum of expected recall cost and expected consumer disutility), i.e., higher (lower) expected social cost induced by increased traceability of each enterprise leads to higher (lower) product quality for both enterprises, enhancing (reducing) quality competition. (2) If an enterprise’s improved (decreased) product quality is driven by its own increased traceability, it will result in lower (higher) consumer demand and profit, while it will result in higher (lower) consumer demand and profit if caused by its competitor’s increased traceability. (3) If an enterprise’s increased traceability results in higher expected social cost, the enterprise’s sales price falls while the competitor’s sales price rises; otherwise, both enterprises’ sales prices fall, leading to greater price competition. (4) Quality competition is unaffected by product liability but is improved by increased recall cost and consumer disutility, whereas price competition is enhanced by increased consumer disutility but is reduced by increased product liability and recall cost. Managerial insights are also discussed.
在产品责任和可追溯性的双头垄断下的质量和价格竞争
我们的研究旨在探讨可追溯性如何影响双头垄断下的质量和价格竞争。建立了两家企业都有责任召回通过可追溯性识别的低质量产品的理论模型,并对消费者因未识别的低质量产品而产生的负面效用进行补偿。通过确定最优产品质量和销售价格决策,得到均衡结果。主要发现如下。(1)可追溯性主要通过预期社会成本(预期召回成本与预期消费者负效用之和)影响产品质量,即提高每一家企业的可追溯性所导致的更高(更低)的预期社会成本会导致两家企业的产品质量更高(更低),从而增强(减少)质量竞争。(2)如果企业产品质量的提高(降低)是由于自身可追溯性的提高,则会导致消费者需求和利润的降低(高),而竞争对手可追溯性的提高则会导致消费者需求和利润的提高(低)。(3)如果企业可追溯性的提高导致预期社会成本的增加,则企业的销售价格下降,而竞争对手的销售价格上升;否则,两家企业的销售价格都会下降,导致价格竞争加剧。(4)质量竞争不受产品责任的影响,但因召回成本和消费者负效用的增加而增强;价格竞争因消费者负效用的增加而增强,但因产品责任和召回成本的增加而减弱。还讨论了管理见解。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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