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Price competition vs. quality competition: Evidence from firm surveys

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  • Morikawa, Masayuki

Abstract

This study uses data from firm surveys to present new findings on firms’ strategies for price/quality competition and on the relationship between competition strategy and various firm characteristics, including profitability and productivity. First, the results indicate that a relatively large number of firms adopt a quality competition strategy, particularly firms operating in the service industries. Second, firms adopting a quality competition strategy tend to have highly educated employees, invest in intangible assets, such as R&D and advertising, and show a higher probability of innovating. Third, the profitability and productivity of firms adopting a quality competition strategy is higher than that of firms adopting a price competition strategy, although the difference in productivity according to competition strategy should be interpreted with caution.

Suggested Citation

  • Morikawa, Masayuki, 2021. "Price competition vs. quality competition: Evidence from firm surveys," Journal of Economics and Business, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:jebusi:v:116:y:2021:i:c:s0148619521000254
    DOI: 10.1016/j.jeconbus.2021.106007
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    More about this item

    Keywords

    Competition; Quality; Differentiation; Innovation; Profitability; Productivity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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