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Firm competition in a probabilistic framework of consumer choice

Author

Listed:
  • Liao, Hao
  • Xiao, Rui
  • Chen, Duanbing
  • Medo, Matúš
  • Zhang, Yi-Cheng

Abstract

We develop a probabilistic consumer choice framework based on information asymmetry between consumers and firms. This framework makes it possible to study market competition of several firms by both quality and price of their products. We find Nash market equilibria and other optimal strategies in various situations ranging from competition of two identical firms to firms of different sizes and firms which improve their efficiency.

Suggested Citation

  • Liao, Hao & Xiao, Rui & Chen, Duanbing & Medo, Matúš & Zhang, Yi-Cheng, 2014. "Firm competition in a probabilistic framework of consumer choice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 400(C), pages 47-56.
    • Handle: RePEc:eee:phsmap:v:400:y:2014:i:c:p:47-56
    DOI: 10.1016/j.physa.2013.12.026
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    References listed on IDEAS

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    Cited by:

    1. Gao, Fujuan & Fenoaltea, Enrico Maria & Zhang, Yi-Cheng, 2023. "Market failure in a new model of platform design with partially informed consumers," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 619(C).
    2. Yuan, Guanghui & Han, Jingti & Zhou, Lei & Liang, Hejun & Zhang, Yicheng, 2019. "Supply and demand law under variable information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 536(C).

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