Dear students, faculty and staff, Nazarbayev University Graduate School of Business invites you to Research Seminar “KEEPING AN ENEMY, HAPPILY!” by Mushegh Harutyunyan
WHEN: Tuesday, November 15th, 12 p.m. – 1 p.m.
WHERE: Block C-3/new GSB/GSPP Building, 3rd floor, Room 3038
Conventional wisdom suggests that more intense competition will lower firms’ profits and that a firm will prefer no competition in the market if possible. We consider a market with two quality-differentiated manufacturers selling through independent exclusive retailers. Our analysis shows that a manufacturer and its retailer can actually both become worse off if their competing manufacturer and retailer exit the market. Put differently, more intense competition in the market can be all-win for the manufacturers, the retailers, and the consumers. Interestingly, the high-quality manufacturer can benefit from an increase in its competitor’s quality, even if that increase is costless; in other words, a firm may prefer a strong rather than weak enemy. These results suggest that a manufacturer’s profit may increase when the perceived quality of its competitor’s product increases, e.g., due to favorable product reviews from consumers or third-party rating agencies, and that the manufacturer may have an incentive to help its competitor to improve product quality or to remain in the market.
Mushegh Harutyunyan is a Ph.D. candidate at Washington University in St. Louis. He earned his master’s degree in economics from Indiana University in Bloomington (2011). He is interested in Competitive strategy, behavioral modeling, consumer decision making, pricing, advertising, information disclosure, distribution channels.