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dc.contributorDepartment of Logistics and Maritime Studiesen_US
dc.creatorGeng, Xen_US
dc.creatorGuo, Xen_US
dc.creatorXiao, Gen_US
dc.publisherInstitute for Operations Research and the Management Sciencesen_US
dc.rights© 2021, INFORMen_US
dc.subjectDuopoly competitionen_US
dc.subjectSocial interactionsen_US
dc.subjectProduct differentiationen_US
dc.titleImpact of social interactions on duopoly competition with quality considerationsen_US
dc.typeJournal/Magazine Articleen_US
dcterms.abstractWe study the impacts of social interactions on competing firms’ quality differentiation, pricing decisions, and profit performance. Two forms of social interactions are identified and analyzed: (1) market-expansion effect (MEE)—the total market expands as a result of both firms’ sales—and (2) value-enhancement effect (VEE)—a consumer gains additional utility of purchasing from one firm based on this firm’s previous and/or current sales volume. We consider a two-stage duopoly competition framework, in which both firms select quality levels in the first stage simultaneously and engage in a two-period price competition in the second stage. In the main model, we assume that each firm sets a single price and commits to it across two selling periods. We find that both forms of social interactions tend to lower prices and intensify price competition for given quality levels. However, MEE weakens the product-quality differentiation and is benign to both highquality and low-quality firms. It also benefits consumers and improves social welfare. By contrast, VEE enlarges the quality differentiation and only benefits the high-quality firm, but is particularly malignant to the low-quality firm. It further reduces the consumers’ monetary surplus. Such impact is consistent, regardless of whether the VEE interactions involve previous or current consumers. We further discuss several model extensions, including dynamic pricing, combined social effects, and various cost structures, and verify that the aforementioned impacts of MEE and VEE are qualitatively robust to those extensions. Our results provide important managerial insights for firms in competitive markets and suggest that they need to not only be aware of the consumers’ social interactions, but also, more importantly, distinguish the predominant form of the interactions so as to apply proper marketing strategiesen_US
dcterms.accessRightsopen accessen_US
dcterms.bibliographicCitationManagement science, 2021, articles in advance, p. 1-19,
dcterms.isPartOfManagement scienceen_US
dc.description.validate202104 bcvcen_US
dc.description.oaAccepted Manuscripten_US
dc.identifier.FolderNumbera0784-n01, a0797-n01-
dc.identifier.SubFormID1666, 1640-
dc.description.fundingTextGeneral Research Fund Grant PolyU 15507318en_US
dc.description.pubStatusEarly releaseen_US
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