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Price Signaling in a Two-Market Duopoly

Hughes, Matthew
http://rave.ohiolink.edu/etdc/view?acc_num=akron1458311593

Abstract Details

2016, Master of Science, University of Akron, Applied Mathematics.
Within any industry, firms typically produce related products over multiple subsequent periods in an attempt to build consumer loyalty and achieve continued sales. Apple releases new iPhones and car companies produce new models every year, relying on consumers believing each new product is of high quality. Firms rely on the spillover effects from previous markets, where firms are able to more easily demonstrate their product's quality to the consumers before purchase. The goal is to find a range of prices which allows the high quality firm to distinguish its type to consumers via the price pH and if spillover effects in subsequent markets can occur. We look at a duopoly of two firms, of high and low qualities, where each firm produces a product in an initial market and a second, related product in a subsequent market. Using each firm's expected profits, based on Bayesian probabilities, we analyze a firm's mimicking strategy to find the range of pH that allows for a separating equilibrium and spillover effects. In a second market where firms are the same qualities as in the first market, the high quality firm experiences spillover effects and can signal its quality with a lower price than in the first market. When firms change qualities in the second market, no spillover effect occurs and the newly high quality firm must increase pH from the previous market in order to separate.
Francesco Renna, Dr. (Advisor)
Stefan Forcey, Dr. (Advisor)
Curtis Clemons, Dr. (Committee Member)
98 p.
Applied Mathematics; Economic Theory; Economics; Management; Mathematics
signaling; price; duopoly; game theory; economics; mathematics; equilibrium; bayesian game

Recommended Citations

Citations

  • Hughes, M. (2016). Price Signaling in a Two-Market Duopoly [Master's thesis, University of Akron]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=akron1458311593

    APA Style (7th edition)

  • Hughes, Matthew. Price Signaling in a Two-Market Duopoly. 2016. University of Akron, Master's thesis. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=akron1458311593.

    MLA Style (8th edition)

  • Hughes, Matthew. "Price Signaling in a Two-Market Duopoly." Master's thesis, University of Akron, 2016. http://rave.ohiolink.edu/etdc/view?acc_num=akron1458311593

    Chicago Manual of Style (17th edition)

akron1458311593
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© 2016, all rights reserved.
This open access ETD is published by University of Akron and OhioLINK.