The benefits of being small: Duopolistic competition with market segmentation

Chaim Fershtman*, Eitan Muller

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Consider a duopolistic market in which consumers are not necessarily aware of the firms' existence. The market is characterized by the existence of four segments: a duopolistic segment which consists of consumers who are aware of both firms, a segment of consumers who are unaware of either firm and two captive market segments. We assume that by advertising, firms control the proportion of consumers who are aware of their existence. The relative sizes of the four segments affect the equilibrium of the duopolistic pricing game. We show that being large may be disadvantageous, and that even if gaining awareness is costless firms may wish to remain small.

Original languageEnglish
Pages (from-to)101-111
Number of pages11
JournalReview of Industrial Organization
Volume8
Issue number1
DOIs
StatePublished - Jan 1993

Keywords

  • awareness
  • duopoly
  • segmentation

Fingerprint

Dive into the research topics of 'The benefits of being small: Duopolistic competition with market segmentation'. Together they form a unique fingerprint.

Cite this