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A Differential Game Theoretic Model for Duopolistic Competition on Design Quality

Author

Listed:
  • Samar K. Mukhopadhyay

    (University of Wisconsin-Milwaukee, Milwaukee, Wisconsin)

  • Panagiotis Kouvelis

    (Washington University, St. Louis, Missouri)

Abstract

In this paper we propose a differential game theoretic model to analyze the design quality and pricing decisions for a product over the product life cycle. The market is represented as a duopoly where our product competes against a similar product marketed by our competition. The duopolistic competition is modeled as a two-player nonzero sum noncooperative game. The resulting control theoretic model is solved under certain functional assumptions to describe the Nash equilibrium strategies of the two competitors. Finally, observations made on an extensive set of numerical experimentations over a variety of model parameters are summarized into a set of relevant managerial guidelines on developing design quality and pricing strategies.

Suggested Citation

  • Samar K. Mukhopadhyay & Panagiotis Kouvelis, 1997. "A Differential Game Theoretic Model for Duopolistic Competition on Design Quality," Operations Research, INFORMS, vol. 45(6), pages 886-893, December.
    • Handle: RePEc:inm:oropre:v:45:y:1997:i:6:p:886-893
    DOI: 10.1287/opre.45.6.886
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    Citations

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    Cited by:

    1. Chenavaz Régis, 2017. "Better Product Quality May Lead to Lower Product Price," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 17(1), pages 1-22, January.
    2. Bowon Kim & Fouad El Ouardighi & Sangsun Park, 2012. "Optimal dynamics of technology and price in a duopoly market," Applied Economics Letters, Taylor & Francis Journals, vol. 19(11), pages 1017-1022, July.
    3. De Giovanni, Pietro & Zaccour, Georges, 2023. "A survey of dynamic models of product quality," European Journal of Operational Research, Elsevier, vol. 307(3), pages 991-1007.
    4. Mukhopadhyay, Samar K. & Setaputra, Robert, 2007. "A dynamic model for optimal design quality and return policies," European Journal of Operational Research, Elsevier, vol. 180(3), pages 1144-1154, August.
    5. Chenavaz, Régis Y. & Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M., 2020. "Modeling the impact of product quality on dynamic pricing and advertising policies," European Journal of Operational Research, Elsevier, vol. 284(3), pages 990-1001.
    6. Fan, Ming & Kumar, Subodha & Whinston, Andrew B., 2009. "Short-term and long-term competition between providers of shrink-wrap software and software as a service," European Journal of Operational Research, Elsevier, vol. 196(2), pages 661-671, July.
    7. Ye, Guangliang & Mukhopadhyay, Samar K., 2013. "Role of demand-side strategy in quality competition," International Journal of Production Economics, Elsevier, vol. 145(2), pages 696-701.
    8. El Ouardighi, Fouad, 2014. "Supply quality management with optimal wholesale price and revenue sharing contracts: A two-stage game approach," International Journal of Production Economics, Elsevier, vol. 156(C), pages 260-268.
    9. Tapiero, Charles S., 2007. "Consumers risk and quality control in a collaborative supply chain," European Journal of Operational Research, Elsevier, vol. 182(2), pages 683-694, October.
    10. El Ouardighi, Fouad & Kim, Bowon, 2010. "Supply quality management with wholesale price and revenue-sharing contracts under horizontal competition," European Journal of Operational Research, Elsevier, vol. 206(2), pages 329-340, October.
    11. Fouad El Ouardighi & Konstantin Kogan, 2013. "Dynamic conformance and design quality in a supply chain: an assessment of contracts’ coordinating power," Annals of Operations Research, Springer, vol. 211(1), pages 137-166, December.
    12. Xiaowei Zhu, 2017. "Outsourcing management under various demand Information Sharing scenarios," Annals of Operations Research, Springer, vol. 257(1), pages 449-467, October.

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