Role of demand-side strategy in quality competition
The research questions studied in this paper concern the role of demand side strategy for a firm engaged in duopolistic competition in quality and price. A demand side strategy research looks towards markets and consumers unlike the traditional resource side strategy research that looks upstream — into the firm’s resources and its supply side. We examine whether following a demand side strategy would benefit the firm, the consumers or both. In a market where two firms are competing with each other, we first find the equilibrium quality and price levels for the traditional case where the two firms optimize their own profit function. We use this case as a benchmark case for comparison. Next, we let one firm (the lower quality firm) adopt a demand side strategy operationalized by an objective function where the profit is augmented by consumer surplus. The equilibrium results show that a demand side strategy would increase the product quality level in the market, and improve the adopter firm’s competitiveness at the same time increasing the market consumer surplus. We also study the case where the higher quality firm adopts demand side strategy and compare the results with the two cases mentioned above. Overall, we find that adopting a demand side strategy would benefit the adopter firm’s profitability and the consumers. We, therefore, find evidence of what the strategy literature has been predicting about the role of demand side strategy.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 145 (2013)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/ijpe|
References listed on IDEAS
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.:
- Ashish Arora & Alfonso Gambardella & Laura Magazzini & Fabio Pammolli, 2009.
"A Breath of Fresh Air? Firm Type, Scale, Scope, and Selection Effects in Drug Development,"
INFORMS, vol. 55(10), pages 1638-1653, October.
- Ashish Arora & Alfonso Gambardella & Laura Magazzini & Fabio Pammolli, 2009. "A Breath of Fresh Air? Firm Type, Scale, Scope and Selection Effects in Drug Development," KITeS Working Papers 003, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2009.
- Arora, Ashish & Gambardella, Alfonso & Magazzini, Laura & Pammolli, Fabio, 2007. "A Breath of Fresh Air? Firm types, scale, scope and selection effects in drug development," MPRA Paper 16042, University Library of Munich, Germany.
- Mukhopadhyay, Samar K. & Ma, Huafan, 2009. "Joint procurement and production decisions in remanufacturing under quality and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 120(1), pages 5-17, July.
- Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
- 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.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
- Yasemin Y. Kor & Joseph T. Mahoney & Steven C. Michael, 2007. "Resources, Capabilities and Entrepreneurial Perceptions," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1187-1212, November.
- Charles H. Fine, 1986. "Quality Improvement and Learning in Productive Systems," Management Science, INFORMS, vol. 32(10), pages 1301-1315, October.
- Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
- Ivo Zander & Udo Zander, 2005. "The Inside Track: On the Important (But Neglected) Role of Customers in the Resource-Based View of Strategy and Firm Growth," Journal of Management Studies, Wiley Blackwell, vol. 42(8), pages 1519-1548, December.
- Olivier Chatain & Peter Zemsky, 2007. "The Horizontal Scope of the Firm: Organizational Tradeoffs vs. Buyer-Supplier Relationships," Management Science, INFORMS, vol. 53(4), pages 550-565, April.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:145:y:2013:i:2:p:696-701. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.