Product innovation and imitation in a duopoly with differentiation by attributes
AbstractThis paper considers a probabilistic duopoly in which products are described by their specific attributes, this form of differentiation embodying the horizontal and vertical dimensions. Consumers make discrete choices and follow a random decision rule based on these attributes. A three-stage game is studied in which firms develop new attributes for their products (innovation), then may imitate the attributes of the competing product and finally compete in price. At the equilibrium, the firm selling the less appreciated product is generally incited to imitate its rival. Confronted to a threat of imitation, the benchmark firm sometimes decreases strategically its attribute index in order to diminish its unit cost of innovation and the differentiation on the market, deterring the imitation in this way. This strategy is efficient when imitation costs are sufficiently concave. In the opposite case, it is preferable for the benchmark firm to accept the imitation. Thus, according to the shape of imitation costs, equilibria with "deterrence" or with "accommodation" "accommodation" occur, completing the current typology of strategic responses to a threat of imitation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series PSE Working Papers with number halshs-00586867.
Date of creation: Feb 2008
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586867
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
quality choices ; differentiation by attributes ; product innovation; product imitation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
- NEP-BEC-2011-04-30 (Business Economics)
- NEP-COM-2011-04-30 (Industrial Competition)
- NEP-CSE-2011-04-30 (Economics of Strategic Management)
- NEP-INO-2011-04-30 (Innovation)
- NEP-MKT-2011-04-30 (Marketing)
- NEP-TID-2011-04-30 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary-Bobo, R.J., 1987.
"Cournot-Walras and locally consistent equilbria,"
CORE Discussion Papers
1987053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"On Hotelling's "Stability in competition","
CORE Discussion Papers RP
-385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.