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Price Competition and Setup Cost

by 1,* and 2
Department of Economics and Business Administration, Yokohama City University, 22-2 Seto, Kanazawa, Yokohama 236-0027, Japan
Department of Economics, Chiba Keizai University, 3-59-5 Todoroki, Inage, Chiba 263-0021, Japan
Author to whom correspondence should be addressed.
Academic Editor: Christoph Frei
Mathematics 2021, 9(3), 289;
Received: 30 December 2020 / Revised: 28 January 2021 / Accepted: 29 January 2021 / Published: 1 February 2021
(This article belongs to the Special Issue Economic Modelling: Theory, Methods and Applications)
Few studies analyze the endogenous emergence of price competition in a new product market. This paper analyzes two differentiated products, an existing product and a newly introduced substitutable product, and investigates conditions under which a price competition endogenously emerges in a new product market in the context of a choice between engaging in price competition and holding price leadership. We demonstrate that Bertrand price competition emerges when the setup cost for the new product is high enough. This result implies that government policies reducing setup costs such as subsidies could change the type of competition to price leadership in a new product market. View Full-Text
Keywords: new product; price competition; price leadership; endogenous timing game new product; price competition; price leadership; endogenous timing game
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MDPI and ACS Style

Ota, R.; Fujiu, H. Price Competition and Setup Cost. Mathematics 2021, 9, 289.

AMA Style

Ota R, Fujiu H. Price Competition and Setup Cost. Mathematics. 2021; 9(3):289.

Chicago/Turabian Style

Ota, Rui, and Hiroshi Fujiu. 2021. "Price Competition and Setup Cost" Mathematics 9, no. 3: 289.

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