This article examines the implications of the potential entry of a copycat who produces and sells a copycat (i.e., imitation) product that competes with the incumbent product. By analyzing a two-period dynamic noncooperative game between these two firms, we identify conditions under which the copycat can gain successful market entry. More importantly, we find that the potential entry of a copycat creates (implicit) pressure for the incumbent to lower its selling price; hence, it improves consumer welfare. Finally, we identify conditions under which the potential entry of a copycat can increase social welfare (i.e., consumer welfare and the profit of both firms).
Copycat, Dynamic Pricing, Entry Strategy, Incumbent
Management Sciences and Quantitative Methods | Marketing | Operations and Supply Chain Management | Strategic Management Policy
Wiley: 24 months
GAO, Sarah Yini; LIM, Wei Shi; and TANG, Christopher.
The impact of the potential entry of copycats: Entry conditions, consumer welfare, and social welfare. (2016). Decision Sciences. 48, (4), 594-624. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5275
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