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Asymmetric competition in food industry with product substitutability

Author

Listed:
  • Yong-Cong YANG

    (Guangdong University of Foreign Studies, Guangzhou, P.R. China)

  • Pu-Yan NIE

    (School of Finance, Collaborative Innovation Center of Scientific Finance & industry, Guangdong University of Finance & Economics, Guangzhou, P.R. China)

Abstract

The paper analyses the effects of asymmetric competition on food industry with product substitutability by establishing a two-stage dynamic game model. The equilibrium is captured under both the Cournot competition and Stackelberg competition. Firstly, under the Cournot competition, lower costs yield a higher quality, more outputs and higher profits. Secondly, the cost difference increases the quality difference, the market size difference and the profit difference. Thirdly, a U-shaped relationship between the product substitutability and the food quality exists. Finally, compared with the case under the Cournot competition, the food security is significantly reduced with the lower quality and less outputs in the case under the Stackelberg competition.

Suggested Citation

  • Yong-Cong YANG & Pu-Yan NIE, 2016. "Asymmetric competition in food industry with product substitutability," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 62(7), pages 324-333.
    • Handle: RePEc:caa:jnlage:v:62:y:2016:i:7:id:130-2015-agricecon
    DOI: 10.17221/130/2015-AGRICECON
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    References listed on IDEAS

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