{"title":"Brand loyalty, managerial delegation and position choices: Bertrand versus Cournot competition","authors":"Tai-Liang Chen , Mingjie Yang","doi":"10.1016/j.regsciurbeco.2024.104052","DOIUrl":null,"url":null,"abstract":"<div><div>In a mature product market, brands compete aggressively with each other using a marketing mix that includes position, pricing, and managerial delegation to win loyal customers and gain a larger market share. We examine the effects of brand loyalty on the endogenous choices of managerial compensation contracts and optimal brand positions in an uncovered market model. We analytically compare 18 symmetric and asymmetric mutual delegation cases associated with three delegation schemes—no delegation, sales delegation and relative performance (RP) delegation—in the Bertrand and Cournot competition modes. In the case of symmetric mutual contracts, under Bertrand competition, a price commitment effect resulting from the delegation decision weakens the competition, inducing higher prices and profits for both brands regardless of the type of delegation scheme. Under Cournot competition, delegation decisions can be viewed as signals to promote competition, intensifying the degree of competition. To acquire more loyal customers and higher profits, mutual RP delegation is the dominant choice under Bertrand competition, whereas mutual profit maximization is the dominant choice under Cournot competition. Furthermore, the social welfare is the highest when both brands optimally choose the RP delegation under Bertrand or optimally choose no delegation under Cournot; however, consumer surpluses are the lowest in both optimal cases.</div></div>","PeriodicalId":48196,"journal":{"name":"Regional Science and Urban Economics","volume":null,"pages":null},"PeriodicalIF":3.5000,"publicationDate":"2024-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Regional Science and Urban Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0166046224000838","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
In a mature product market, brands compete aggressively with each other using a marketing mix that includes position, pricing, and managerial delegation to win loyal customers and gain a larger market share. We examine the effects of brand loyalty on the endogenous choices of managerial compensation contracts and optimal brand positions in an uncovered market model. We analytically compare 18 symmetric and asymmetric mutual delegation cases associated with three delegation schemes—no delegation, sales delegation and relative performance (RP) delegation—in the Bertrand and Cournot competition modes. In the case of symmetric mutual contracts, under Bertrand competition, a price commitment effect resulting from the delegation decision weakens the competition, inducing higher prices and profits for both brands regardless of the type of delegation scheme. Under Cournot competition, delegation decisions can be viewed as signals to promote competition, intensifying the degree of competition. To acquire more loyal customers and higher profits, mutual RP delegation is the dominant choice under Bertrand competition, whereas mutual profit maximization is the dominant choice under Cournot competition. Furthermore, the social welfare is the highest when both brands optimally choose the RP delegation under Bertrand or optimally choose no delegation under Cournot; however, consumer surpluses are the lowest in both optimal cases.
在一个成熟的产品市场中,品牌之间会利用包括定位、定价和管理授权在内的营销组合展开激烈竞争,以赢得忠诚客户和更大的市场份额。我们在一个无覆盖市场模型中研究了品牌忠诚度对经理报酬合同和最佳品牌地位的内生选择的影响。我们分析比较了伯特兰竞争模式和库诺竞争模式下与三种委托方案--无委托、销售委托和相对业绩(RP)委托--相关的 18 种对称和非对称相互委托情况。在对称相互委托的情况下,在伯特兰竞争模式下,委托决策所产生的价格承诺效应会削弱竞争,从而导致两个品牌的价格和利润都提高,而不管委托方案的类型如何。在库诺竞争下,委托决策可视为促进竞争的信号,会加剧竞争程度。为了获得更多忠诚客户和更高利润,在伯特兰竞争下,相互 RP 委托是主要选择,而在库诺竞争下,相互利润最大化是主要选择。此外,当两个品牌在伯特兰竞争中都最优化地选择 RP 授权或在库诺竞争中都最优化地选择不授权时,社会福利最高;但在两种最优情况下,消费者盈余都最低。
期刊介绍:
Regional Science and Urban Economics facilitates and encourages high-quality scholarship on important issues in regional and urban economics. It publishes significant contributions that are theoretical or empirical, positive or normative. It solicits original papers with a spatial dimension that can be of interest to economists. Empirical papers studying causal mechanisms are expected to propose a convincing identification strategy.