Farsighted stable sets in Hotelling's location games
In: Mathematical social sciences, Band 63, Heft 1, S. 23-30
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In: Mathematical social sciences, Band 63, Heft 1, S. 23-30
In: Decision sciences, Band 51, Heft 2, S. 395-422
ISSN: 1540-5915
ABSTRACTMass customization provides a mechanism by which firms can better target a broad scope of consumer preferences and thus, in so doing, potentially increase their profits. We study product‐design and price competition between two mass‐customizing firms that serve consumers with varying tastes and finite reservation prices. Mass customization has recently received notable attention in both industry and academia, but yet there have been few studies concerning its impact in competitive settings. We contribute to this sparse literature by analyzing a two‐stage non‐cooperative game between two firms serving a Hotelling linear city. By comparing symmetric equilibrium results in settings with and without mass customization, we find that customization changes the nature of competition. More specifically, we show that with customization, a symmetric equilibrium emerges only if the firms' customization cost lies below a threshold, however, the magnitude of that cost does not influence product design decisions in equilibrium. We find that the equilibrium with customizing firms will not sustain cost levels above that threshold. Furthermore, we show that mass customizers earn higher equilibrium profits when consumers' fit sensitivity either significantly or only slightly exceeds the product valuation. On the contrary, traditional firms are better off when facing moderate fit sensitivity. We also establish that competition with mass customization may lead to lower profits and consumer surplus.
In: Asia-Pacific journal of risk and insurance: APJRI, Band 12, Heft 2
ISSN: 2153-3792
Abstract
In this paper, a general framework is built up to model the dynamic of consumer health plan choice and individual health insurance market competition. A primary goal is to identify driving forces to individual health insurance equilibrium market coverage and premium. In the baseline model, we introduce plan quality information search cost as an additional determinant to consumer's plan choice. Health insurers compete under the Hotelling's game theory framework. Equilibrium solutions of the baseline model highlight the importance of budget limit and information search cost to health plan enrollment. The more important objective is to examine the impact of market entrants on equilibrium insurance market coverage and plan prices. In the model with market entry, we add an additional dimension to the baseline model. Equilibrium solutions and numerical studies show positive impact of higher insurance market coverage and lower health plan prices. The Affordable Care Act (ACA) brought multiple unprecedented changes to the health insurance market and provided opportunities to study market dynamics and driving forces. The ACA health insurance exchange market experience shows consistency with our model findings even at the early stage of implementation. More importantly, market observations suggest that entry barriers of claim costs and information search cost are high for entrants.
In: History of political economy, Band 53, Heft 5, S. 925-947
ISSN: 1527-1919
Harold Hotelling's work, from natural resources economics to optimal taxation, and from spatial to welfare economics, was deeply influenced by his Georgist affiliation and by a Georgist game that we now call Monopoly, which at the time was known as the Landlord's Game. We explore this influence, its history, and the role it played in Hotelling's work and ideas. We show that political beliefs deeply shaped Hotelling's approach to economics and that the rules of the Landlord's Game helped him think about economic mechanisms.
In: Public choice, Band 152, Heft 3-4, S. 423-426
ISSN: 1573-7101