Sequential Entry with Brand Loyalty Caused by Consumer Learning-by-Using
AbstractThe authors examine first mover advantages in a new product market with sequential entry. Effort is necessary to learn how to use new products and consumers are assumed to differ in their ability to expend such effort. The authors consider the intertemporal pricing strategy of the first entrant who anticipates the late entry of a rival firm. The first entrant's optimal strategy is to set a low introductory price. This builds up a customer base, which remains loyal despite the later entry of a lower-priced rival, and weakens price competition between the two firms. Thus, brand loyalty makes entry into the market easier. Copyright 1992 by Blackwell Publishing Ltd.
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Bibliographic InfoPaper provided by UniversitÃ© PanthÃ©on-Sorbonne (Paris 1) in its series Papiers d'Economie MathÃ©matique et Applications with number 92-17.
Length: 29 pages
Date of creation: 1992
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- Gabszewicz, Jean & Pepall, Lynne & Thisse, Jacques-Francois, 1992. "Sequential Entry with Brand Loyalty Caused by Consumer Learning-by-Using," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 397-416, December.
- GABSZEWICZ, Jean J. & PEPALL, Lynne & THISSE, Jacques-François, . "Sequential entry with brand loyalty caused by consumer learning-by-using," CORE Discussion Papers RP -1018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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