2015 Fiscal Year Annual Research Report
| Project/Area Number |
15J05223
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| Research Institution | Osaka University |
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Principal Investigator |
潘 聡 大阪大学, 経済学研究科, 特別研究員(DC2)
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| Project Period (FY) |
2015-04-24 – 2017-03-31
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| Keywords | Marketing strategy / Endogenous timing / Market separation; / Second mover advantage / Sequential move outcome / Welfare reducing effect |
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| Outline of Annual Research Achievements |
I consider a market with high wealth inequality of consumers. To fully capture the market feature, I assume that consumers can be segmented into two groups by their willingness to pay-one group with high wealth buys only brand products while the other one with low wealth cares little about the brand. There are two brand firms producing brand products and several nonbrand firms producing nonbrand products. The brand firms simultaneously choose whether to enter this market in a very early period or in a later period. Because the nonbrand firms are always lack of innovation incentive and are thus less active in promoting new products, we assume they move after the brand firms do.
I show the following results: (i) Although both brand firms are homogeneous in all aspects, one of them may be willing to let the other firm move first. (ii) The brand firm who moves later may obtain higher profits than the one who moves earlier. (iii) The increasing number of nonbrand firms enhances the profits of the one who moves first but harms the one who moves later. (iv) The social welfare is not always improved when the market becomes more competitive.
All the above results have been confirmed by using numerical simulations (by Mathematica). The assumption concerning consumer preferences have also been verified by scientific survey among foreign students. These results were presented at the 42nd Annual Conference of EARIE. This research has been written into an academic paper which has been published as a discussion paper and is being reviewed by an international journal.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
My results of this year are quite surprising.
In most existing literature, if firms compete in quantity, sequential moving outcome cannot exist. Moreover, the leader must have advantage over the follower. My research shows total different results which substantially complement the literature.
All my results have been confirmed by using numerical simulations (by Mathematica).
Moreover, for my assumption that consumers with different wealth show different preferences towards brand products, I use scientific survey among foreign students to show the rationality, which substantially enhances the robustness of my research.
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| Strategy for Future Research Activity |
I expect that firms become more prudent under market uncertainty, even if they are efficient in production. That is to say, firms need to prevent themselves from revealing market status inadvertently, especially when they are in the pioneering position.
To this end, I will add market uncertainties into this model. That is, the low wealth consumers’willingness to pay cannot be directly observed by brand firms. When the firm who moves earlier decides its quantity of sale, it may inadvertently release signals of this uncertainty to its competitor who moves later.
The following procedures are considered: (i) Find out how large the market uncertainty needs to be to make brand firms unprofitable if move in an early stage. Then they will give up pioneering advantage by shifting movements to a late stage. (ii) Verify that only when the size of low-end market is large enough can capacity constraint restrict nonbrand firms’ output. Find out what such relationship between capacity constraint and low-end market size should be and how it affects brand firms’ timing choices. (iii) Find out which one the driving force for brand firms’ decisions is: decreasing market uncertainty or a prevention from being imitated.(iv) Seek for empirical literature and more real-world cases which are close to my model. (v) Attend academic conferences to communicate with researchers from different backgrounds for new opinions and advice. (vi) The new results of my research will be developed into an academic paper.
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