149 research outputs found
Increasing Dominance - the Role of Advertising, Pricing and Product Design
Despite the empirical relevance of advertising strategies in concentrated markets, the economics literature is largely silent on the effect of persuasive advertising
strategies on pricing, market structure and increasing (or decreasing) dominance. In a simple model of persuasive advertising and pricing with differentiated goods,
we analyze the interdependencies between ex-ante asymmetries in consumer appeal, advertising and prices. Products with larger initial appeal to consumers will
be advertised more heavily but priced at a higher level - that is, advertising and price discounts are strategic substitutes for products with asymmetric initial appeal.
We find that the escalating effect of advertising dominates the moderating effect of pricing so that post-competition market shares are more asymmetric than pre-competition differences in consumer appeal. We further find that collusive advertising (but competitive pricing) generates the same market outcomes, and that network effects lead to even more extreme market outcomes, both directly and via
the effect on advertising
Strategies of Foreign Direct Investment in the Presence of Technological Spillovers
Dawid H, Zou B. Strategies of Foreign Direct Investment in the Presence of Technological Spillovers. Working Papers in Economics and Management. Vol 12-2013. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2013.In this paper we present a differential game model of two firms with different
technologies producing the same good and selling in the same world market.
The firm equipped with advanced technology is deciding whether to outsource parts
of its production to the home country of its competitor, where wages and the level of
technology are lower. Outsourcing reduces production costs but is associated with
spillovers to the foreign competitor. The degree to which the foreign competitor can
absorb these spillovers depends on its absorptive effort. Using numerical methods
the properties of a Markov Perfect Equilibrium of this game are characterized and
the implications of the variation of different key parameters are examined
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Knowledge Transfer and Accomodation Effects in Multinational Corporations: Evidence from European Subsidiaries
Foreign subsidiaries in multinational corporations (MNCs) possess knowledge that has different sources (e.g., the firm itself or various sources in the environment). How such sources influence knowledge transfer is not well understood. Drawing on the āaccommodation effectā from cognitive psychology, the authors argue that accumulation of externally sourced knowledge in a subsidiary may reduce the value of transferring that subsidiaryās knowledge to other parts of the MNC. The authors develop a parsimonious model of intrafirm knowledge transfer and test its predictions against a unique data set on subsidiary knowledge development that includes the sources of subsidiary knowledge and the extent of knowledge transfer to other MNC units. The authors show that a high level of externally sourced knowledge in a subsidiary is associated with a high level of knowledge transfer from that subsidiary only if a certain tipping point of internally sourced knowledge has been surpassed. This suggests that subsidiary knowledge stocks that are balanced in terms of their origins tend to be more valuable, congruous, and fungible, and therefore more likely to be transferred to other MNC units
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