경영과학 (Korean Management Science Review)

한국경영과학회 (The Korean Operations Research and Management Science Society)
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제조비용 증가에 대한 대응 전략으로서 제품 크기 축소와 가격 인상의 비교 연구

Downsizing and Price Increases in Response to Increasing Input Cost

  • 강영선 (서울시립대학교 경영학부) ;
  • 강현모 (국민대학교 경영학부)
  • Kang, Yeong Seon (University of Seoul, Department of Business Administration) ;
  • Kang, Hyunmo (Kookmin University, Department of Business Administration)
  • 투고 : 2014.09.24
  • 심사 : 2015.02.11
  • 발행 : 2015.03.31
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초록

We analyze a duopoly competition when two firms face input cost increases. The objective of this study is to determine the firms' optimal strategy between a price increase and downsizing under conditions of a spatially differentiated market and consumers' diminishing utility on the product size. We develop a theoretical model of two competing firms offering homogenous products using the standard Hotelling model to determine how firms' optimal strategies change when facing input cost increases. In this paper, there are two types of duopoly competitions: symmetric and asymmetric. In the symmetric case, the two firms have the same marginal cost and are producing and selling identical products. In the asymmetric case, the two firms have different marginal costs. The results show that the optimal strategy decision depends on the size of the input cost increase and the cost differences between the two firms. We find that when two firms are asymmetric (i.e., they have different marginal costs), the two firms might choose asymmetric pairs of strategies in equilibrium under certain conditions. When the cost differences between the two firms are sufficiently large and the cost increase is sufficiently small, the cost leader chooses price increase, and the cost-disadvantaged firm chooses downsizing in equilibrium. This asymmetric strategy reduces price competition between two firms, and consumers are better off. When the cost differences between the two firms are sufficiently large, downsizing is the dominant strategy for the cost-disadvantaged firm. The cost-disadvantaged firm finds it more profitable to reduce the product size than to increase its price to reduce price competition, because consumers prefer downsizing to price increases. This paper might be a good starting point for further analytical research in this area.

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참고문헌

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