The Effects of Product Line Rivalry: Focusing on the Issue of Fighting Brands

경쟁산품선적영향(竞争产品线的影响): 관주전두품패(关注战斗品牌)

Firms produce various products that differ by function, design, color, etc. Product proliferation occurs for three different reasons. When there exist economies of scope, the unit cost for a product is lower when it is produced in conjunction with another product than when it is produced separately. Second, consumers are heterogeneous in the sense that they have different tastes, preferences, or price elasticities. A firm can earn more profit by segmenting consumers into different groups with similar characteristics. For example, product proliferation helps a firm increase profits by satisfying various consumer needs more precisely. The third reason for product proliferation is based on strategy. Producing a number of products can not only deter entry by providing few niches, but can also cause a firm to react efficiently to a low-price entry. By producing various products, a firm can reduce niches so that potential entrants have less incentive to enter. Moreover, a firm can produce new products in response to entry, which is called fighting brands. That is, when an entrant tries to attract consumers with a low price, an incumbent introduces a new lower-quality product while maintaining the price of the existing product. The drawback of product proliferation, however, is cannibalization. Some consumers who would have bought a high-price product switch to a low-price product. Moreover, it is possible that proliferation can decrease profits when a new product is less differentiated from a rival’s than is the existing product because of more severe competition. Many studies have analyzed the effect of product line rivalry in the areas of economics and marketing. They show how a monopolist can solve the problem of cannibalization by adjusting quality in a market where consumers differ in their preferences for quality. They find that a consumer who prefers high-quality products will obtain his or her most preferred quality, but a consumer who has not such preference will obtain less than his or her preferred quality to reduce cannibalization. This study analyzed the effects of product line rivalry in a duopoly market with two types of consumers differentiated by quality preference. I assume that the two firms are asymmetric in the sense that an incumbent can produce both high- and low-quality products, while an entrant can produce only a low-quality product. The effects of product proliferation can be explained by comparing the market outcomes when an incumbent produces both products to those when it produces only one product. Compared to the case in which an incumbent produces only a high-quality product, the price of a low-quality product tends to decrease in a consumer segment that prefers low-quality products because of more severe competition. Prices, however, tend to increase in a segment with high preferences because of less severe competition. It is known that when firms compete over prices, it is optimal for a firm to increase its price when its rival increases its price, which is called a strategic complement. Since prices are strategic complements, we have two opposing effects. It turns out that the price of a high-quality product increases because the positive effect of reduced competition outweighs the negative effect of strategic complements. This implies that an incumbent needs to increase the price of a high-quality product when it is also introducing a low-quality product. However, the change in price of the entrant’s low-quality product is ambiguous. Second, compared to the case in which an incumbent produces only a low-quality product, prices tend to increase in a consumer segment with low preferences but decrease in a segment with high preferences. The prices of low-quality products decrease because the negative effect outweighs the positive effect. Moreover, when an incumbent produces both kinds of product, the price of an incumbent‘s low-quality product is higher, even though the quality of both firms’ low-quality products is the same. The reason for this is that the incumbent has less incentive to reduce the price of a low-quality product because of the negative impact on the price of its high-quality product. In fact, the effects of product line rivalry on profits depend not only on changes in price, but also on sales and cannibalization. If the difference in marginal cost is moderate compared to the difference in product quality, the positive effect of product proliferation outweighs the negative effect, thereby increasing the profit. Furthermore, if the cost difference is very large (small), an incumbent is better off producing only a low (high) quality product. Moreover, this study also analyzed the effect of product line rivalry when a firm can determine product characteristics by focusing on the issue of fighting brands. Recently, Korean air and Asiana airlines have established budget airlines called Jin air and Air Busan, respectively, to confront the launching of budget airlines such as Hansung airline and Jeju air, among others. In addition, as more online bookstores have entered the market, a leading off-line bookstore Kyobo began its own online bookstore. Through fighting brands, an incumbent with a high-quality product can increase profits by producing an additional low-quality product when its low-quality product is more differentiated from that of the entrant than is its high-quality product.

公司生产不同功能, 设计, 颜色的产品. 产品扩散的出现有三个不同的原因. 当存在规模经济, 当这种产品和别的产品一起生产时, 单位成本比单独生产要低. 二, 消费者是异构的, 即它们具有不同的品味, 喜好, 或价格弹性. 一家公司可赚取细分为具有类似特点的不同群体的消费者更多的利润. 例如, 产品扩散通过更准确地满足不同消费者的需要来帮助公司增加利润. 产品扩散的第三个原因是基于战略. 生产一定数量的产品, 不仅可以阻止通过提供给一些少数市场的产品进入, 也使得公司可以有效地应付低价格进入. 通过生产各种产品, 公司可以减少利基, 使潜在进入者有较少进入的诱因. 此外, 企业可以生产新产品来应对进入, 我们称之为战斗品牌. 也就是说, 当一个进入者试图以低廉的价格吸引消费者, 已存在者介绍新的低质量的产品, 同时保持现有产品的价格. 产品扩散的缺点是同型装配. 一些买了高价位的产品的消费者会转向低价位的产品. 此外, 当新产品与对手现有的产品的异化程度不高时, 由于激烈的竞争, 产品扩散会降低利润. 许多研究已经在经济分析和市场营销等领域的产品线竞争的影响. 它们展示了一个垄断者可以通过调整质量来解决市场中的消费者对质量的偏好不同的同型装配的问题. 他们发现, 喜欢高品质的产品的消费者将获得他或她最喜欢的质量, 但没有这方面的偏好的消费者将获得比他或她所喜爱的质量低的产品. 本研究分析了产品的竞争在一个双头垄断市场, 两种不同类型的消费者对质量偏好的影响. 我假设这两家公司将在这个意义上的不对称, 一个运营商可以同时生产高, 低质量的产品, 而一个进入者只能产生低质量的产品. 产品扩散的影响是可以通过比较市场结果来解释, 当已存在的运营商生产两种产品和只生产一种产品时. 在这个案例中, 当已存在的运营商只生产高品质的产品, 由于激烈的竞争, 在喜欢低质量产品的消费群中低质量的产品价格趋于下降. 但由于缺乏竞争, 在喜欢高质量产品的消费群中价格会上涨. 据了解, 当企业在进行价格竞争时, 理想状况是当公司的对 手提高价格时, 此公司也提高价格, 这被称为战略补充. 由于价格是战略性的补充, 我们有两种相反的效果. 事实证明, 一个高品质的产品价格上升, 因为竞争力减弱的积极作用超过了战略互补的负面影响. 这意味着, 已存在的运营商推出了低质量的产品时还需要增加高品质产品的价格. 然而, 在进入者的低质量产品的价格变化是模糊的. 二, 此案例中, 已存在的运营商只生产低品质的产品, 在偏好低质量的消费群中价格往往增加. 但在偏好高质量的消费群中价格往往下降. 低质量产品的价格下降是因为负面影响大于正面影响. 而且, 当已存在的运营商生产两种产品时, 其低质量产品的价格往往较高, 尽管两家的低品质的产品质量一样. 此原因由于对高品质产品价格的负面影响, 运营商没有较大的动机去降低低品质产品的价格. 事实上, 竞争的产品线对利润的影响不仅取决于价格变化, 还取决于销售和同型装配. 如果在边际成本同产品质量的差异相比是适中的话, 产品扩散的积极影响大于负面影响, 从而增加利润. 此外, 如果成本差异是非常大(小), 运营商最好只生产一种低 (高)质量的产品. 而且, 本研究还分析了当公司通过关注战斗品牌来决定产品特征时, 竞争产品线的影响. 最近, 大韩航空和韩亚航空公司建立了廉价航空线路, 分别是Jin线路和釜山线. 来应对Hansung航空和济州航空. 另外, 很多网上书店也进入市场, 例如处于领先地位的实体书店Kyobo已经有了自己的网上书店. 通过战斗品牌, 在它的低品质产品跟新成员比起来有差别时, 一个具有高品质产品的运营商通过生产更多的低质量产品可以增加利润.