Article ID: | iaor200973226 |
Volume: | 55 |
Issue: | 12 |
Start Page Number: | 2028 |
End Page Number: | 2043 |
Publication Date: | Dec 2009 |
Journal: | Management Science |
Authors: | Federgruen Awi, Yang Nan |
Keywords: | competition |
We characterize the equilibrium behavior in a broad class of competition models in which the competing firms' market shares are given by an attraction model, and the aggregate sales in the industry depend on the aggregate attraction value according to a general function. Each firm's revenues and costs are proportional with its expected sales volume, with a cost rate that depends on the firm's chosen attraction value according to an arbitrary increasing function. Whereas most existing competition papers with attraction models can be viewed as special cases of this general model, we apply our general results to a new set of quality competition models. Here an industry has