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Hawks and doves in segmented markets : A formal approach to competitive aggressiveness

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Author Info
Claude d’Aspremont
Rodolphe Dos Santos Ferreira
Jacques Thépot () (Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur)
Abstract

Competitive aggressiveness is analyzed in a simple spatial oligopolistic competition model, where each one of two firms supplies two connected market segments, one captive the other contested. To begin with, firms are simply assumed to maximize profit subject to two constraints, one related to competitiveness, the other to market feasibility. The competitive aggressiveness of each firm, measured by the relative implicit price of the former constraint, is then endogenous and may be taken as a parameter to characterize the set of equilibria. A further step consists in supposing that competitive aggressiveness is controlled by each firm through its manager hiring decision, in a preliminary stage of a delegation game. When competition is exogenously intensified, through higher product substitutability or through larger relative size of the contested market segment, competitive aggressiveness is decreased at the subgame perfect equilibrium. This decrease partially compensates for the negative effect on profitability of more intense competition.

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Paper provided by Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur, Strasbourg (France) in its series Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) with number 2007-04.

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Date of creation: 2007
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Handle: RePEc:lar:wpaper:2007-04

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  1. Lumpkin, G. T. & Dess, Gregory G., 2001. "Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle," Journal of Business Venturing, Elsevier, vol. 16(5), pages 429-451, September. [Downloadable!] (restricted)
  2. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn. [Downloadable!] (restricted)
  3. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
  4. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October. [Downloadable!] (restricted)
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