Quality Competition and Entry Deterrence: When to Launch an Extra Brand

cege Discussion Papers Number 223

25 Pages Posted: 25 Nov 2014

See all articles by Stephan Müller

Stephan Müller

University of Goettingen (Göttingen)

Georg Götz

University of Giessen - Department of Economics

Date Written: November 24, 2014

Abstract

In this paper, we study the rational for an incumbent to launch a second brand when facing potential entry in a market with quality differentiated products and a fringe producer. Depending on market size, costs for a second brand and a potential entrant’s setup cost the incumbent might use a second brand both when deterring and when accommodating entry. The analysis generates predictions about the equilibrium degree of product differentiation, the presence of a multiproduct incumbent, and the determinants of successful entry.

Keywords: Multiproduct firms, quality competition, vertical product differentiation, entry accommodation, entry deterrence.

JEL Classification: L13, D43, M31

Suggested Citation

Müller, Stephan and Götz, Georg, Quality Competition and Entry Deterrence: When to Launch an Extra Brand (November 24, 2014). cege Discussion Papers Number 223, Available at SSRN: https://ssrn.com/abstract=2529992 or http://dx.doi.org/10.2139/ssrn.2529992

Stephan Müller (Contact Author)

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Georg Götz

University of Giessen - Department of Economics ( email )

Licher Str. 62
Giessen, Hessen D-35394
Germany
+49 641 99 22050 (Phone)
+49 641 99 19867 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/goetz/

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