Published papers

In response to traditional brick-and-mortar retailers' multi-channel strategies, direct-to-consumer (DTC) firms have recently attempted to adopt novel business modes for their further growth: While several firms open their ``experiential'' physical stores, which can provide consumers comfortable experiences beyond evaluating and purchasing products, others specialize in and enhance their online stores. This study develops a game-theoretic model to determine a DTC firm's optimal competitive strategy in a market where a single dominant retailer adopts its multi-channel strategy. We show that the full elimination of a consumer's disutility for purchasing from the store of the DTC firm, regardless of being through its physical or online store, is not necessarily optimal. Specifically, when opening an experiential store, setting the attractiveness for visiting that store at an intermediate level is optimal, unless the level of disutility for the rival firm's online store is intermediate. Conversely, when enhancing an online store, setting at the maximum level is necessarily optimal. However, the DTC firm's profit is then never superior to that under the mode of opening the experiential store unless the costs for store enhancement are significant. We discuss our results' robustness to several realistic scenarios.

In this study, we provide a game-theoretic analysis to investigate an entrant firm's partner selection for offering its new product to a market, particularly to a foreign market. The entrant has either a brand advantage or technological superiority over incumbent firms. We analyze the strategic interaction between one entrant and three incumbent firms that include one major firm (or a firm offering a popular product) and two local firms (or firms offering niche products). We explore the impact of such asymmetric demand structures on the entrant's partner selection. Our equilibrium analysis indicates that forming a partnership with a firm that currently has the largest market share because of its superior product is not necessarily optimal for the entrant. When the value offered by the entrant is significantly high, it is more beneficial for the entrant to ally with the major firm, even if that firm currently has a smaller market share than the local firms because of its inferior product. We also demonstrate that when the entrant can add technological superiority to the partner's product, the entrant's optimal partner selection may change non-monotonically in the degree of this superiority. Furthermore, in response to the entrant's optimal partner selection, the relative profitability between incumbent firms can reverse discontinuously and drastically according to the degree of the value offered by the entrant.

When a branded firm offers a new product at a quality level different from that of its existing product(s), some bias is often present as consumers are affected by the quality of the existing product(s) when evaluating the quality of the new one(s). Consequently, this product offering creates a forward spillover effect and, in turn, might even impact consumers' utility from the existing product, referred to as the reciprocal spillover effect. Given the potential for such brand spillovers, how should a branded firm enter a new market with a vertically differentiated product? We analytically investigate a branded firm's choice of quality and the profitability of entering a new market. The results indicate that bilateral spillovers cause the entrant to fail to adjust the quality of its new product, meaning that a new firm providing a high-end existing product entering the market will not be profitable, even in the absence of any fixed entry costs and potential competitors. Nevertheless, we also show that when the new market has a rival firm, the potential presence of severe spillovers works as a commitment device for the entrant's quality positioning, which can reverse the entrant's incentive to enter; in contrast, the entrant's resulting profits can be greater in this case than in the absence of spillovers.

This study investigates an alliance formation between competing manufacturers and a monopolistic platform retailer, where consumer data collected by the retailer are available between all the alliance members to utilize for the development of their products. The manufacturers alternatively choose to adopt the direct-to-consumer model, where they collect and utilize own consumer data or sell products without data utilization. They are differentiated from each other in varying degree of substitutability. Under the alliance, the effectiveness of utilizing their rival's consumer data is proportional to the degree of substitutability. By using a game-theoretic approach, we analyze a strategic interaction between two or three manufacturers and the retailer to derive the condition under which the alliance is successfully formed in equilibrium and to discuss the retailer's profitability of the alliance formation. We show that participation in the alliance has a direct effect of sharing their rivals' consumer data and an indirect effect of mitigating price competition between the manufacturers due to the ``free-riding'' effect of data sharing. Despite these merits, the alliance may not be formed in equilibrium. When the two manufacturers are differentiated to some extent or the three manufacturers are symmetrically differentiated, the alliance is successfully formed. Otherwise, it is never formed in equilibrium. We show that the retailer benefits the most from the alliance with two intermediately differentiated manufacturers and that an increase in the number of manufacturers participating in the alliance does not necessarily improve the retailer's profitability.

This study analyzes the production and pricing strategy of a monopoly firm in the presence of the snob effect, whereby consumers value a product more when its availability is lower. Real-world firms often intentionally cause the snob effect by strategically reducing supply quantities or even causing shortages. This observation suggests the existence of a trade-off between utilizing the snob effect and avoiding opportunity costs. We consider a general multiperiod model in which a monopoly firm determines the dynamic paths of price and sales quantity; although consumers are not forward looking, they evaluate past stockouts with a discount factor. We find that the optimal dynamic paths of the price and output level vary depending on the degree of consumer sensitivity to stockouts, the consumer's discount factor on past shortage, and the firm's discount factor on future profit. Nevertheless, the total profit monotonically increases with the degree of consumer sensitivity to stockouts.

© 2019 John Wiley & Sons, Ltd. We study a retailer service model of in-store advertising, in which a neutral retailer provides product information to consumers for free but charges manufacturers. Our results show that the retailer's optimal pricing induces the manufacturers to decrease the number of items they offer. Nevertheless, this relaxes the competition between the manufacturers so that they benefit from using the in-store service, unless the cost of communicating with consumers about the between-firm products is lower. Furthermore, the service can be made socially beneficial by reducing the inefficiency resulting from an excessive number of items when manufacturers are not well differentiated.

© 2018 Elsevier B.V. This study analyzes the stability of horizontal mergers in a Cournot oligopoly market. Although many researchers have addressed this issue, most previous studies assume symmetric firms in terms of demand and cost structures due to analytical tractability. We attempt to find a stable merger in a general [Formula presented]-firm oligopoly in which we allow for asymmetric substitutability between firms. To ensure analytical tractability, we follow the related literature and employ a simple core allocation for a monopoly merger as a stability concept. We analyze several typical markets with asymmetric substitutability and show that although [Formula presented]-core is always nonempty in every setting that we examine, the [Formula presented]-core is very likely to be empty—it is always empty in a market with three or more symmetric firms. Nevertheless, we present an example of a market with a nonempty [Formula presented]-core, regardless of the number of firms in a market. The market has at most two symmetric firms in terms of substitutability (e.g., a linear city). Furthermore, substitutability is so low across the market that each firm competes with only two neighboring firms. Therefore, contrary to the conventional view suggested in previous studies, we show that a monopoly merger can be stable in a Cournot oligopoly market, even if there are many firms in the market.

Copyright © 2017 John Wiley & Sons, Ltd. In this study, we analyze the sequential decisions on product positioning of two firms in the presence of network externalities. One commonly accepted phenomena in a market where a network externality arises is the first-mover advantage, in which the first entrant into a market can earn a higher profit than later entrants. However, in some recent online services markets, we see that the second mover earns a higher profit than the first mover. This occurs because the second mover strengthens its variety of available functions and services markedly, thereby facilitating consumers' work and communication with its main product, which we call network externality intensity. Based on this observation, we analyze sequential positioning in Hotelling's framework by incorporating an asymmetric network externality intensity between firms. We show that unlike the results of previous related studies, both first- and second-mover advantages can appear in the equilibrium depending on the relationship of the network externality intensity between firms; further, they do not change monotonically with the level of network externality intensity.

© 2017 Wiley Periodicals, Inc. In this study, we investigate price and quality decisions in a duopoly in the presence of firms’ quality positions, which are determined by the quality levels of their existing core products. Into a standard model of vertical differentiation, we incorporate a “repositioning cost” that is proportional to the quality differences between firms’ current and new products. By varying the levels of quality positions, we analyze the impact of this cost on the equilibrium outcomes. Our results show that the presence of repositioning costs restricts firms’ abilities to improve profitability and differentiate themselves vertically. As a result, a high-positioned firm does not necessarily have a competitive advantage over a low-positioned firm, even if the former offers a superior new product in equilibrium. In addition, if a low-positioned firm is significantly cost-efficient compared with its rival with regard to repositioning, then that firm can earn higher profits than those of a high-positioned firm by strategically offering its low-end product. These results contrast sharply with those based on the standard vertical differentiation model.

© 2019, Springer Science+Business Media, LLC, part of Springer Nature. We study product repositioning between firms with predetermined base positions for their products in existing markets. Based on Hotelling’s linear city model, we attempt to generalize models in past studies by encompassing asymmetric base positions and asymmetric cost-efficiency in repositioning. We find that neither base products nor new products in attractive positions in the market necessarily imply competitive advantage. In particular, a potentially cost-inefficient firm can earn higher profits than does a rival, even though the former firm’s product is in a less attractive position. We also clarify the welfare implications for regulating or encouraging firms’ repositioning activities.

© 2020 Elsevier B.V. This study provides a game-theoretic analysis for channel coordination of a two-tier supply chain in which retailers have fairness concerns. We explore a setting in which a single manufacturer sells its product to consumers through two competing retailers that are horizontally differentiated at varying levels. We extend the previous literature, which examines only monopolistic supply chains. We show that the channel can be successfully coordinated in equilibrium in that the total channel profit is maximized and the retailers do not incur disutility due to disadvantageous inequality, even if they are not averse to their advantageous inequality. Specifically, only if the retailers are moderately differentiated is a fair channel successfully achieved. In addition, we find that in a market in which a fair channel is coordinated in equilibrium, the retailers necessarily benefit from their fairness concerns. Furthermore, we investigate a situation in which the ideal distribution ratios between the channel members can be endogenously chosen prior to subsequent pricing stages. Interestingly, even if such endogenous choices are allowed for the retailers, a fair channel still can be coordinated in equilibrium. Specifically, the retailers set their ideal ratios in equilibrium at the lowest level in their feasible ranges of successful coordination. However, this results in the prisoner's dilemma, because if they were allowed to collude to set the ratios, the retailers would benefit the most from the highest level in the feasible ranges.